Bankers for guidelines on restructured assets

Say if assets perform well, they should be upgraded

Indian banks have asked the Reserve Bank of India (RBI) to announce proper guidelines on the classification of restructured assets, particularly for cases in which repayments are regular, under the revised schedule.

RBI deputy governor K C Chakrabarty on Wednesday met top bankers in Mumbai and discussed the rising non-performing assets (NPAs) in the system. Stress in sectors like textile, steel, mining and aviation was also discussed, bankers said.

In the meeting, lenders said if restructured assets continued to perform well, according to the restructured schedule for a certain period of time, these should be taken off the restructured book and upgraded into standard assets. This would reduce the provisioning burden on banks.

Pratip Chaudhuri, chairman, State Bank of India, said, "We said according to our definition of NPAs (non-performing assets), the restructuring definition should have a timeline. If an account adheres to the revised schedule for two years, so that there is definite proof it is performing, it should be taken out of the categorisation of the restructured account." Currently, there was no definite timeline on the upgradation of a restructured asset, he added.

"Today, there is a lot of mystery about what is restructured. Everything restructured is seen as equivalent to an NPA. Restructured means the dues are not being paid according to the schedule, not according to the revised schedule. But the ultimate recovery of the debt is not in doubt. The probation period and when it needs to exit restructuring need to be more clearly defined," he said, replying to queries after the meeting.

M Narendra, chairman, Indian Overseas Bank, said, "This was a general review. It was also aimed at finding out what the sector-wise issues are. The NPA situation is very much manageable and under control. Sectors like textile and aviation did get a special mention from the regulator."

Of late, most banks have been plagued with mounting restructured assets, which has led to higher provisioning in stressed sectors. Rising interest rates and the slowdown in the economy are seen as major reasons behind this.

Sectors like aviation, textile, infrastructure, iron and steel and telecom have been the worst hit.

Loans worth Rs 50,250 crore were referred for corporate debt restructuring (CDR) during the April-December period of the current financial year. Currently, total outstanding loans referred for restructuring are worth Rs 1.43 lakh crore, according to CDR forum data. With a share of 26.8 per cent, the iron and steel sector accounts for most of these, followed by infrastructure (12 per cent) and textiles (eight per cent).