RBI's new NPA norms may undermine bank earnings: Fitch

PTI
Srinagar, Publish Date: Feb 23 2018 1:25AM | Updated Date: Feb 23 2018 1:25AM
RBI's new NPA norms may undermine bank earnings: FitchRepresentational Pic

The Reserve Bank's new norms for overhauling the mechanism to deal with bad loans is aimed at speeding up the NPA resolution, but would undermine the banking sector earnings in the near-term, credit rating agency Fitch said today.

However, stronger regulatory efforts to clean-up bad loan problems, combined with planned recapitalisation of state banks, could help support a recovery in the sector over the medium term, the US-based agency said in a statement.

Regulators appear increasingly impatient with the slow resolution of NPL stock, which has prolonged the non-performing loan (NPL) cycle, it added.

"India's new framework aimed at speeding up NPL resolution is likely to push up banks' credit costs and undermine earnings in the near-term," said Fitch, which has a negative outlook on the banking sector.

The new framework gives banks less discretion over the reporting and resolution of bad assets and attempts to address the complexities involved in resolving the stressed loans of large borrowers.

"Banks will need to report defaults by large borrowers weekly, indicating a more invasive approach to tracking bad assets," it said.

The timeline for dealing with bad loans has also been made prescriptive, with banks and borrowers forced to implement a plan for resolving loans within 180 days of default or go to insolvency court.

"The new framework's overall focus is on recognising and quickly resolving bad loans. It is likely to result in a rise in NPLs, as banks are forced to reclassify stressed accounts previously recorded as special mention loans or restructured loans.

"More accounts are also likely to be pushed toward insolvency courts and into liquidation, particularly since the new guidelines require all of a borrower's lenders to agree on a resolution plan to keep it away from the courts," Fitch said. PTI

Latest News

  1. Youth shot dead in south Kashmir’s Tral
  2. Youth shot dead in south Kashmir’s Tral
  1. Mirwaiz can’t travel to Delhi due to hostile environment: Counsel replies to another NIA summon
  2. Mirwaiz can’t travel to Delhi due to hostile environment: Counsel replies to another NIA summon
  1. Watch: HK Nissan Athwajan launches ‘intelligent’ SUV, ‘KICKS’
  2. Watch: HK Nissan Athwajan launches ‘intelligent’ SUV, ‘KICKS’
  1. One dead in possible terror attack on Dutch tram
  2. One dead in possible terror attack on Dutch tram
  1. 83 supermassive black holes discovered in early universe
  2. 83 supermassive black holes discovered in early universe
  1. ECI issues election notification for Baramulla, Jammu Lok Sabha seats
  2. ECI issues election notification for Baramulla, Jammu Lok Sabha seats
  1. Many injured in Dutch shooting, attacker flees
  2. Many injured in Dutch shooting, attacker flees
  1. Missing Sopore boy traced in Jammu: Police
  2. Missing Sopore boy traced in Jammu: Police
  1. China, Pakistan to discuss Pulwama fallout
  2. China, Pakistan to discuss Pulwama fallout
  1. Modi continues to rule popularity charts despite slight dip: IANS-CVOTER tracker poll
  2. Modi continues to rule popularity charts despite slight dip: IANS-CVOTER tracker poll
  1. Baby reunited with dad as Indonesia flood death toll hits 77
  2. Baby reunited with dad as Indonesia flood death toll hits 77
  1. Notification for first phase of Lok Sabha polls issued
  2. Notification for first phase of Lok Sabha polls issued
  1. Officers backing early Assembly polls harassed: Omar
  2. Officers backing early Assembly polls harassed: Omar
  1. Terrorist who carried out massacre in New Zealand visited Israel in 2016
  2. Terrorist who carried out massacre in New Zealand visited Israel in 2016
  1. Pervez Musharraf shifted to Dubai hospital after 'reaction' from rare disease
  2. Pervez Musharraf shifted to Dubai hospital after 'reaction' from rare disease
  1. China says 13,000 Xinjiang ‘terrorists’ arrested since 2014
  2. China says 13,000 Xinjiang ‘terrorists’ arrested since 2014
  1. Sopore family seeks help in tracing missing boy
  2. Sopore family seeks help in tracing missing boy
  1. Forces launch search operation in north Kashmir’s Sopore
  2. Forces launch search operation in north Kashmir’s Sopore
  1. New Zealand Police: Terrorist acted alone, may have had support
  2. New Zealand Police: Terrorist acted alone, may have had support
  1. No bail for teen sharing Christchurch attack video
  2. No bail for teen sharing Christchurch attack video
  1. New Zealand firms to pull ads from Facebook, Google
  2. New Zealand firms to pull ads from Facebook, Google
  1. Army man killed, three wounded in cross-LoC firing in Jammu and Kashmir
  2. Army man killed, three wounded in cross-LoC firing in Jammu and Kashmir
  1. Graves prepared as New Zealand looks to bury mosque massacre dead
  2. Graves prepared as New Zealand looks to bury mosque massacre dead
  1. Search operation launched in Drabgam village of Pulwama
  2. Search operation launched in Drabgam village of Pulwama
  1. 21 soldiers dead as gunmen storm Mali army camp
  2. 21 soldiers dead as gunmen storm Mali army camp
  1. No consensus yet on next Goa CM: BJP MLA
  2. No consensus yet on next Goa CM: BJP MLA
x
This site uses cookies to deliver our services and to show you relevant news and ads. By using our site, you acknowledge that you have read and understand our Cookie Policy, Privacy Policy, and our Terms of Service.That's Fine