The Reserve Bank of India surprised the banks on Friday night. For the cases being taken to the banker’s court, the RBI has made huge increase in provisioning. This may result in a jerk of Rs 50,000 crore in the financial year 2018. Two bankers aware of the RBI order have said this.
RBI has instructed banks to provide at least 50% provision of loan amount. In the case of banker speed court, he has taken this step due to the fear of loss to the banks. RBI has also said that the cases which are not resolved in the time limit of loan restructuring, should be equal to the provisioning loan as it will have to be forced to sell the property to the banks.
Banks were expecting loose Provisioning Norms in such cases. That is why he has shocked the RBI order. Earlier, the Reserve Bank had directed banks to take the 12 Mega Defaulter to the Bankers peace Court. These include names like Essar Steel, Bhushan Steel and Alok Industries. The banks are afraid that Bankers’ Court examination has not yet been done. They believe that many cases will not be resolved within the deadline. In such a situation, they will have to sell the property of those companies. This will require banks to have adequate provisioning in the next financial year
In a confidential letter sent to the CEO of the banks, the RBI has also said that they will have 100% provisioning for the unsecured loan, as soon as those cases will be referred to the National Company Law Tribunal (NCLT) under the BankerPix Code. A senior banker said, “The good thing is that the RBI has given time to do the provisioning in three quarters.”
In this case, the RBI did not respond to queries related to the previous weekend email. He had asked the banks to take 12 Mega Defaulter to Bank of Barracks Court on June 13. The Reserve Bank believes that the process of bad loan recovery will be faster. The RBI said at the time, “Circulars are being issued separately for revised provisioning of cases accepted for the bankers.”
The amount of bad loan currently in the Indian banking system is 25% of which is 2.5 lakh crore due to these companies. Bankers say that in these cases, now 30-40% provisioning will have to be done, which will lead to the need of Rs 30,000-50,000 crore by the end of the financial year. Provisioning can be terminated if the company starts repaying the loan after one year of the implementation of the resolution plan.