BoI doesn't see big raise in provisioning post RBI revision
Last week, RBI tightened loan restructuring norms for banks, making the whole process stringent. As per the new norms, provisioning on the newly-restructured account has been raised to 5 per cent from June 1 from 2 per cent now.
June 03, 2013 / 08:11 IST
Bank of India (BoI) doesn't see its provisioning requirement substantially going up due to RBI's revised norms on restructured and non-performing assets (NPAs), a top official of the public lender has said.
"As a bank, we don't do any financial engineering on restructured accounts and follow straight line method to calculate the net present value," BoI Executive Director M S Raghavan told PTI.Also read: BoB, Bank of India, Oriental Bank look weak: SP TulsianLast week, RBI tightened loan restructuring norms for banks, making the whole process stringent. As per the new norms, provisioning on the newly-restructured account has been raised to 5 per cent from June 1 from 2 per cent now. However, for the old restructured account it will be done in a phased manner.Under the present norm, an account after restructuring is not classified as NPA. However, as per the modified rules, such accounts would be treated as NPAs.The central bank has also asked lenders not to do any financial engineering to artificially reduce the net present value of cash flows.However, Raghavan said BoI would have to set aside provisions for old restructured accounts as per the banking regulator's norms."We have to set aside 0.75 per cent more this fiscal as provisions for the existing restructured book as per RBI norm," he said.According to the bank, total standard restructured advances stood at Rs 16,353 crore by the end of March 2013.Referring to provisions relating to promoters seeking restructuring, Raghavan said only serious promoters with financially viable projects would opt for debt recast. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
