Easier RBI asset quality norms puts banks at risk, mar transparency: Fitch

The new rules signal a shift away from enhancing asset classification

Issuing a warning about the adverse effect of relaxing asset quality norms, rating agency Fitch said the move it signifies a gradual shift away from RBI’s effort to enhance the quality and transparency of asset classification in Indian banking system.

The Reserve Bank of India gave 12 more months for the one-time restructuring scheme for micro, small and medium-sized enterprises (MSMEs). Also it announced a relaxation in asset classification for certain real estate projects, marking a further dilution of the regulator's drive to enhance loan recognition, Fitch said.

There is a risk that such regulatory leeway will perpetuate moral hazard