RBI may hike NPA provision: Deputy governor

RBI deputy governor K C Chakrabarty has come down heavily on banks showing higher profits without providing adequately for bad loans and said, if need be, the central bankmay hike provision coverage ratio (PCR) levels. He also said lending rates would have been far lower if banks had got their non-performing asset (NPAs)down. 

 

"Why do banks need to show profits as high as 25%? They can show 5% growth in their profits. If they are not doing (providing more), I will increase it (PCR)," he said in an interview. RBI had done away with its earlier requirement of forcing banks to maintain the PCR, or the ratio of provision to gross non-performing assets (NPAs), at 70%. 

The central bank had increased the PCR to 70% after the Lehman crisis in 2008 and this was applicable till September 2011. While almost all private banks have higher PCR, a majority of state-run lenders could not meet this deadline. A number of public sector banks, especially smaller ones, showed a drop in PCR in Q2 earnings and, as a result, posted a good jump in profits. 

Speaking about NPAs of banks, Chakrabarty attributed a majority of them to poor administration and risk management practices and went to the extent of terming it as 'non-performing administration'. (Times of India)