Moneycontrol
Apr 19, 2017 12:44 PM IST |

RBI asks banks to review telecom sector; FinMin official wants Trai to do its job properly

Indian telecom players are burdened with debt, which is likely to increase due to the ongoing tariff war and consolidation in the sector.

RBI asks banks to review telecom sector; FinMin official wants Trai to do its job properly

Moneycontrol News

The Reserve Bank of India (RBI) has raised concern over the banks' loans to the telecom companies and has asked the lenders to consider making provisions for standard assets in this sector at higher rates so that necessary resilience is built in the balance sheets.

"The telecom sector is reporting stressed financial conditions, and presently interest coverage ratio for the sector is less than one, Board of Directors of the banks may review the telecom sector latest by June 30, 2017," a circular released by the central bank said on Tuesday.

Indian telecom players are burdened with debt, which is likely to increase due to the ongoing tariff war and consolidation in the sector.

The telecom sector owns around Rs 4.2 lakh crore to lenders, reports the Hindu.

RBI also asked the banks to put in place a board–approved policy for making provisions for standard assets at rates higher than the regulatory minimum.

"The policy shall require a review, at least on a quarterly basis, of the performance of various sectors of the economy to which the bank has an exposure to evaluate the present and emerging risks and stress therein," the circular said.

Talking to the Business Standard a senior finance ministry official said that India's telecom regualator is not doing its job properly and a downfall of the sector due increasing competition may put more stress on the already non-performing assets (NPAs) ailing banks.

 
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