RBI likely to redefine wilful defaulters
By Our Banking Bureau | 02 Apr 2002
In a speech circulated in-absentia at the Banking Summit 2002, organised by the Confederation of Indian Industry here, Muniappan said the central bank is examining the recommendations of the Kohli group on wilful defaulters.
The RBI is concerned that some new private banks that started off with a clean slate have acquired a large level of non-performing assets (NPAs) in a short period, he said. The total gross NPAs of new private sector banks at the end of 31 March 2001 stood at 5.1 per cent.
To force higher provisioning, the RBI has decided that it will not allow banks to increase dividend levels unless they reach a provisioning level of 50 per cent of gross NPAs.
As on 31 March 2001, only five banks had a provisioning level to gross NPAs of more than 50 per cent. Provisions held by public sector banks as a whole was at 42.83 per cent and that by private sector banks was 35 per cent of gross NPAs.
Muniappan said the interest-bearing assets of Indian banks have so far derived comfort from a large proportion of them being held in the form of sovereign debt paper or sovereign-guaranteed advances.
NPAs of banks (both advances and investments taken together) form just about 5 per cent of the total assets at the end of March 2001. But this facet will undergo a rapid change at any time if the defaults under the guaranteed advances to undertakings of some of the state governments escalate any further, he said.
