Reserve Bank of India logo displayed inside the central bank building in Mumbai, India. (Photographer: Karen Dias/Bloomberg)

Indian Lenders Seek Easier Bad Loan Rules From Regulator

(Bloomberg) -- India’s state-run banks sought an easing of rules related to bad loan recognition in a meeting with newly-appointed central bank Governor Shaktikanta Das, people familiar with the matter said.

  • The heads of seven banks also asked for a liquidity boost for the financial system to help non-bank financiers tide over a cash crunch, the people said, asking not to be identified as the discussions are private. An easing of lending curbs on 11 weak state-run lenders was also discussed, they said.

Key Insights

  • Regulations have limited banks’ ability to extend credit. The bank chiefs may see an opening for rules to be softened after previous Governor Urjit Patel’s surprise resignation this week following a rift with the government.
  • Bankers are hoping Das will be more lenient in implementing regulations on bad-loan recognition and its prompt corrective action framework, helping them boost lending and reducing their need to provision for soured loans.
  • A liquidity boost to the financial system and funding lines to non-bank lenders would calm credit markets that have been rattled after shock defaults by Infrastructure Leasing & Financial Services Ltd.

Get More

  • Power companies have approached the courts to seek relief from the RBI’s February circular, which tightened norms on debt servicing.
  • Das said Wednesday that he also plans to meet with the CEOs of private sector banks to understand their concerns.
  • An RBI spokesman didn’t immediately respond to a phone call seeking comments.

©2018 Bloomberg L.P.