RBI gets proactive to tackle India's Rs.7 Lakh crore bad loans pileup
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With Indian banks sitting on about Rs. 7 lakh crore in bad loans, experts say that RBI is calling for extra disclosure on asset categorization so that banks are more proactive on flagging down stressed assets as non performing. This is being done to improve governance and smoothen transition to Indian Accounting Standards (IND-AS 109), India Ratings and Research (Ind-Ra) said in a note.
Here are five key measures taken by the RBI to prevent bad loans:
RBI's additional disclosure requirements for banks would compel banks to tighten their internal non-performing loans recognition systems Ind-Ra said.
One of the biggest changes, the new accounting standards would bring about is that banks will be required to provision capital based on expected loss on stressed assets replacing the current policy of provisions based on incurred loss.
The new directive will also set an uniform bar for identifying bad loans and improve the overall quality of disclosures.
Migration to IND-AS 109 is likely from the next year, and the pro-forma numbers are to be released from June 2017.
RBI has prescribed higher risk weights for telecom, real estate lending, unhedged foreign exposure, capital market exposure among others.#casansaar (NDTV Profit)
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