You are here: Home » PTI Stories » National » News
Business Standard

RBI may hike NPA provision ratio if needed: Chakrabarty

Press Trust of India  |  Mumbai 

"Why banks need to show profits as high as 25 per cent? They can show 5 per cent growth in their profits. If they are not doing (providing more), I will increase it (PCR)," he told PTI in an interview.

The RBI had done away with its earlier requirement of forcing banks to maintain the PCR, or the ratio of provision to gross non-performing assets (NPAs), at 70 per cent.

The apex bank had increased the PCR to 70 per cent after the Lehman crisis in 2008 and this was applicable till September, 2011.

While almost all private banks have higher PCR, majority of the state-run lenders could not meet this deadline.

A number of public sector banks, especially the smaller ones, have shown a drop in PCR in the second quarter earnings and posted a good jump in profits as a result.

The RBI has floated a discussion paper to explore having dynamic provisioning which requires banks to keep aside money during good times for a rainy day, rather than providing after an account has gone bad.

Speaking about NPAs of banks, Chakrabarty attributed a majority of them to poor administration and risk management practices of lenders and went to the extent of terming it as 'non-performing administration.'

"I call NPA as non-performing administration. We have to make the administration functioning," Chakrabarty, who oversees banking supervision at RBI, said.

The RBI Deputy Governor said the "change in the administration" has to come in a slew of areas which would be internal as well as external.

Lending rates would have been far lower if banks had got their NPAs down, Chakrabarty said. (MORE)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, December 09 2012. 10:55 IST