By Ankur Mishra
The Indian Banks’ Association (IBA) has requested Reserve Bank of India for six months’ deferment of 20% additional provisioning needed in the March quarter for unresolved cases as per June 7 circular of the regulator, sources told FE. The banks are facing provisioning pressure of at least Rs 25,000-30,000 crore in the March quarter as most of the cases where inter-creditor agreement (ICA) were signed remain unresolved, sources said. As per the June 7, 2019 circular of RBI, banks will have to make additional 20% provisioning for the cases where resolution could not be reached in 210 days’ period after signing the inter-creditor agreement (ICA). “This is the time to take extraordinary measures, hopeful that RBI will defer 20% additional provisioning to be done in the March quarter for unresolved cases,” said Ashok Kumar Pradhan, MD & CEO, United Bank of India.
The provisioning pressure for banks will also come from the cases where resolution process has started. In big ticket size cases like DHFL, which is already undergoing resolution at NCLT, banks had made provisioning of around 15% of total exposure in the December quarter. Financial creditors have around Rs 41,000-crore exposure to DHFL. Experts believe that banks will have to continue making 15% more provision in the March quarter for the mortgage lender as per the master circular of RBI on prudential norms on income recognition, asset classification and provisioning pertaining to advances.
IBA has also urged the regulator to reduce cash reserve ratio (CRR) by 1% from the current rate of 4%. CRR is the amount of funds that banks have to maintain with RBI at all times. Apart from it, IBA has proposed RBI to consider deferment of term-loan repayments by six months and not to classify working capital loans as non-performing assets (NPA) for three more months, even in the case of default. According to sources, the final announcement on relaxations sought by bankers on behalf of IBA will be made by the RBI before March 31.
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