50% provisioning reasonable for defaulted loans, says Viral Acharya

It is based on any historical recovery rates that banks secured debt have typically earned

The Reserve Bank of India (RBI) Deputy Governor Viral Acharya said on Friday it was "very reasonable" to ask banks to make provision for 50 per cent of the amount of defaulted loans submitted under the country's insolvency and bankruptcy code (IBC).

Acharya's comments confirm local media reports that the central bank had asked lenders to set aside 50 per cent of the defaulted loans.

"I think the provisions are very reasonable based on any historical recovery rates that banks even on secured debt have typically earned," he told reporters on the sidelines of an event for the book launch of a former RBI Governor.