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RBI asks banks to closely monitor loans to telecom sector

Telecom sector has a debt of about Rs 4.6 lakh crore

Press Trust of India  |  Mumbai 

Reserve Bank of India
Reserve Bank of India

The on Tuesday asked to make higher provisioning for loans to the that is facing financial stress and closely monitor their exposure to avoid any adverse impact on businesses. The sector has a debt of about Rs 4.6 lakh crore even as it faces pressure on revenues and profitability in the wake of cut-throat competition following entry of Jio. The Reserve said have been asked to put in place a Board-approved policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors. "More immediately, as the is reporting stressed financial conditions, and presently interest coverage ratio for the sector is less than one, boards of directors of the may review the latest by June 30, 2017...," it said in a notification. Interest coverage ratio indicates the capacity of an organisation to service the debt and ability to repay it over the tenure of the loan. It further asked to "consider making provisions for standard assets in this sector" at higher rates so that necessary resilience is built in the balancesheets "should the stress reflect on the quality of exposure to the sector at a future date". Besides, should also subject the exposure to the to closer monitoring, it added. The further said boards should frame policy on making provisions for standard assets at higher rates at least once a quarter.

The review should be to access performance of various sectors of the economy to which the has an exposure to evaluate the present and emerging risks and stress therein. "The review may include quantitative and qualitative aspects like debt-equity ratio, interest coverage ratio, profit margins, ratings upgrade to downgrade ratio, sectoral non-performing assets and stressed assets, industry performance and outlook, legal and regulatory issues faced by the sector, etc. The reviews may also include sector specific parameters," the added. In another notification, the has prescribed a format for to disclose in the 'Notes to Accounts' to the financial statements. This, the said, is being done to ensure greater transparency and promote better discipline with respect to compliance with income recognition, asset classification and provisioning (IRACP).

First Published: Tue, April 18 2017. 22:26 IST