Bankers Who DAMAGED Banks BY Their Corrupt Habits ARE Now Demanding Relaxation IN NPA Norms For Survival

Banks oppose RBI committee's suggestion of higher NPA provision

Say move will inflate bad loans in books and affect credit rating

BS Reporter / Mumbai Aug 31, 2012, 00:46 ISTCollected from Business Standard . Words in black is news in original , in red ink shows the important point of the news in original and in blue colour are my comments thereupon. Banks have opposed the suggestions of a Reserve Bank of India (RBI) committee on loan restructuring, as they fear these, if implemented, would lead to a sharp rise in non-performing assets (NPAs). In its report released in July, the Mahapatra committee had suggested the abolition of regulatory forbearance while recasting debt after two years. In the interim, for fresh loan recasts, it had sought an increase in standard asset provisioning to five per cent, against the current two per cent.  The Reserve Bank of India had set up a working group under the chairmanship of B Mahapatra, executive director, RBI, to review the guidelines on restructured advances of banks and financial institutions. Bankers felt if regulatory forbearance was taken away, which would mean all restructured loans would have to be classified as NPAs, it would increase NPAs in the system. This would have an implication on banks’ profitability and ratings. “Banks’ ratings would be drastically affected if NPAs increase sharply. An adverse rating would make it difficult to raise funds at viable costs,” said the chairman and managing director of a public sector bank. The Indian Banks’ Association, the industry body of lenders, has communicated its views to the central bank. A banking industry official said: “Bankers have suggested maintaining status quo on NPA provisioning, as the current economic slowdown has already stressed (the lenders). Public sector banks, for which asset quality worsened more than that of their private sector counterparts, are expected to see more pressure on profitability if the Mahapatra panel recommendations are implemented.” ( MY COMMENTS : EXISTING NPAS ARE CREATION OF LAST TEN YEARS AND MORE AND THESE HIDDEN NPAs ARE NOW SURFACING  WHEN BANKERS ARE UNABLE TO MANIPULATE AS MUCH AS THEY USED TO DO EARLIER i.e. BEFORE THE TOOLS OF 'SYSTEM GENERATED IDENTIFICATION' DEVELOPED AND INTRODUCED IN BANKS. How is it possible that global recession or slowdown has damaged the health of companies ?  Advances sanctioned after the 2008 crisis or after the latest slowdown in Europe , are also becoming bad.  Who are responsible for the fresh advances becoming NPA.  Why quick mortality is increasing ? Who are responsible for recruitment of bad persons as higher ranked officers and who are responsible for posting unskilled officers as Branch Head or Regional Head or Credit In-charge) Saday Sinha, vice-president (equity research), Kotak Securities, said: “We believe public sector banks would report higher credit costs on the back of higher slippages, along with new recommendation on restructured loans. RBI’s working group has recommended an increase in provisioning for restructured loans — from two per cent to five per cent over FY13-14.  However, on fresh restructuring, banks are required to provide five per cent. We have done a sensitivity analysis, and this shows the impact on bank’s profits before tax would be one to 13 per cent during FY13-14.” According to estimates, stressed assets in the banking system — NPAs and restructured loans — stand at about nine per cent of advances. Restructured advances amount to seven per cent. RBI estimates suggest about 20 per cent of the recast debt may turn into NPAs. (  MY COMMENTS : AS A MATTER OF FACT TOTAL OF STRESSED ASSETS IS MORE THAN NINE PERCENT . STILL A LOT HAVE BEEN CONCEALED. vOLUME OF RESTRUCTURED AND NPA IS MORE THAN DOUBLE OF WHAT HAS BEEN DECLARED ) According to RBI data, since the global financial crisis of 2008, the ratio of restructured standard advances to gross advances was the highest in case of public sector banks. In 2012, while the ratio for public sector banks was 5.73 per cent, that for private banks was 1.61 per cent. (MY COMMENTS:  IT MEANS THE STEPS TAKEN TO STIMULATE THE ECONOMY AFTER SUB PRIME CRISIS OF THE YEAR 2008 HAS DAMAGED THE BANKS INSTEAD OF IMPROVING ITS HEALTH. WHO ARE RESPONSIBLE FOR SUCH CRITICAL SICKNESS?  POLITICIANS OR RBI OFFICIALS OR BANKERS?) STRESSED BOOK   Loan book (Rs cr) Total stressed book (Rs cr) Stress as % of loans Public sector banks Allahabad Bank 110,460 11,920 10.8 Indian Overseas Bank 148,370 15,520 10.5 Union Bank 173,910 17,270 9.9 Bank of Baroda 285,810 17,590 6.2 State Bank of India 945,820 57,230 6.1 Punjab National Bank 294,470 14,910 5.1  Private sector banks Axis Bank 171,150 4,430 2.6 ICICI Bank 268,430 6,110 2.3 HDFC Bank 213,340 1,040 0.5 Stressed book = Non-performing assets + restructured book                           Source: Kotak Securities At 8.24 per cent, the ratio of restructured accounts to gross advances is the highest for the industries sector. For agriculture, the ratio stood at 1.45 per cent, while for services, it was 3.99 per cent. The ratio stood at 2.24 per cent for priority sector advances and 5.83 per cent for non-priority sector loans. http://www.business-standard.com/india/news/banks-oppose-rbi-committee/s-suggestionhigher-npa-provision/484952/