According to data compiled by ratings agency ICRA, Indian banks are set to report a fresh spike in bad loan numbers based on new RBI norms that require lenders to classify loans, henceforth restructured as non-performing assets. Around 50 large borrowers have banking exposure of Rs 2000 Crore or more, and will need resolution by September 1 this year. The total mount of borrowings of these companies account to Rs 2.5 Lakh Crore of debt.
If the resolution plan fails to be implemented by the mentioned deadline, the banks will need to initiate proceedings under the Insolvency and Bankruptcy Code against these borrowers. A financial stability report of the RBI said the special mention accounts (SMA2) account for advances of around 3.5 per cent of bank loans. Such loans are not yet classified as NPAs. Bankers in the past, have used the threat of classifying a borrower as a defaulter to get them back on track for timely payments. Failure to meet payment timelines now would result in borrowers being compulsorily classified as a defaulter.
SBI deputy MD Sunil Srivastava said banks would be proactive in classifying loans as they would not want their loan accounts to be identified by the RBI and pointed out for divergence. He said, “Banks will now proactively take a stance as they are being encouraged to recognise bad assets.” The RBI has also moved away from a prescriptive regime. Srivastava said, “The guidelines have moved from prescriptive to normative. However, banks will need to get a rating of the restructured debt from an external agency.” Siby Antone, chairman of Edelweiss Asset Reconstruction, said, “The good part is that it is a very generic framework within which bankers have to now operate. There are no guidelines on eligibility unlike the past, which resulted in many accounts being excluded.”
“The only catch,” he said, “is that it now says that all lenders must agree to restructuring and this must be reflected in the books of bankers as well as borrowers. This will make the whole scheme impractical. In the earlier schemes, it was 75 per cent because there were many non-mainstream lenders who may not like to join the scheme.”
