The Reserve Bank today extended the time-frame to spread over the shortfall arising out of sale of bad assets to securitisation companies/asset reconstruction companies at a price below the net book value, to March 2016.
The Reserve Bank Thursday extended the time-frame to spread over the shortfall arising out of sale of bad assets to securitisation companies/asset reconstruction companies at a price below the net book value, to March 2016.
"As an incentive for early sale of NPAs, banks can spread over any shortfall, if the sale value is lower than the net book value (NBV), over a period of two years. It has been decided to extend this dispensation for assets sold on or after March 31, 2015 and up to March 31, 2016," the Reserve Bank said in a notification.
The earlier facility was up to March 31, 2015. Net book value is the book value less provisions held by banks for the bad assets. The move comes as state-run banks continue to report higher bad loans, including restructured accounts, which rose to 13.2 percent during the year ended March 2015, raising alarm bells for the Reserve Bank.
Gross non-performing assets for PSBs as of March 2015 stood at 5.17 percent while the stressed assets ratio (which include NPAs and restructured loans) stood at 13.2 percent (or over Rs 7,12,000 crore), which is nearly 230 bps more than that for the system, according to RBI data.
This means over 8 percent of the advances were restructured during the year 2014-15. Stressed assets were 11.02 percent in March 2013 and 11.89 percent in March 2014.
What is more worrying is the massive spike in recast loans turning bad, which means borrowers defaulting on restructured debt, that jumped 90 percent in the fourth quarter of the last fiscal year to Rs 56,995 crore, which is almost twice Rs 29,980 crore in the year-ago period, according to CDR Cell data.
A whopping 40 percent loans restructured between 2011 and 2014 turned dud assets again. According to Crisil, banks' bad loans may jump by 20 bps to 4.5 percent or Rs 60,000 crore to Rs 4 trillion this fiscal.
The CDR loans stood at Rs 2.86 trillion as of March 2015, up 18.22 percent from Rs 2.42 trillion a year ago.
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