Banks want RBI to relax norms for loans to highly indebted firms

There is no ban on giving loans, but it would cost higher provisions for the bank

Effective April 1, banks have to set aside higher provisions for loans given to highly indebted companies, the system-wide limit for which is set at Rs 25,000 crore for the financial year 2017-18.

Banks are not comfortable with this move, and some of them have asked the Reserve Bank of India (RBI) to go easy on the provisioning part. 

The limit of indebtedness comes down to Rs 15,000 crore from 2018-19, and then Rs 10,000 crore from April 2019 onwards. Beyond these limits, the RBI wants banks to invest in debt instruments issued by the companies, rather than giving them loans directly. 

But,