SBI Chief Calls For More Dispensations From RBI To Resolve Bad Loans

Banks need more dispensations from the Reserve Bank of India (RBI) if the process of resolving bad loans is to move forward, State Bank of India Chairman Arundhati Bhattacharya said at a media briefing on Wednesday.

For India’s 42 listed banks, gross non-performing assets have more than doubled to Rs 7 lakh crore from Rs 3.4 lakh crore at the end of the quarter ended September 2015, according to data compiled by BloombergQuint. The RBI’s asset quality review kicked off in July 2015, and was aimed at recognising non-performing assets that were classified as standard, providing for them, and then working on resolving them.

Also Read: Banking Scorecard: Who Was Hit The Hardest By The Asset Quality Review?

Banks should be allowed to amortise losses on account of haircuts they will have to take to resolve its loans, she said. This will give banks greater flexibility to effect resolution in large stressed accounts.

The Securities and Exchange Board of India (SEBI), in a special dispensation, has allowed banks to use the current market price for conversion of debt into equity for strategic debt restructuring (SDR) cases. In normal cases, under the SEBI’s pricing formula, the average of the company’s share price over six months must be considered.

Finally, Bhattacharya suggested that the oversight committee that has been mooted to vet cases under the scheme for strategic structuring of stressed assets be also used for the other schemes as well. She was responding to questions on whether the resolutions of bad loans have been slowed on account of bankers’ fear of reprisal for decisions taken in the process.