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RBI's new norms to deal with stressed assets credit positive, says Moody's

The RBI's revised framework brings back the focus on the need for the timely resolution of such assets, says Moody's

Press Trust of India  |  New Delhi 

A Reserve Bank of India (RBI) logo is seen at the gate of its office in New Delhi. Photo: Reuters

Moody's Investors Service Monday said the Reserve Bank's new prudential framework for stressed asset resolution is credit positive', but flagged the slower-than-expected progress of resolution under Insolvency and Code as a key hurdle.

The RBI's revised framework for the resolution of stressed assets is credit positive, because it brings back the focus on the need for the timely resolution of such assets, and the buildup of loan loss provisioning against those assets, Moody's Investors Service VP Financial Institutions Group Alka Anbarasu said.

The (RBI) last week issued a prudential framework for resolution of stressed assets, which give lenders 30 days to review a borrower account before labelling it as a non-performing asset (NPA) in case of default.

This framework replaces the earlier circular which mandated lenders to start resolution even if there was one day default. This circular was quashed by the Supreme Court in April.

Moody's said, extension of the circular to non-bank companies (NBFCs) will help align the loan loss provisioning norms for the large stressed accounts of NBFCs with commercial

Nevertheless, the slower-than-expected progress under the Insolvency and Code (IBC) remains the key hurdle to the timely resolution of stressed assets. The cleanup of the bank's balance sheets could therefore still take another two to three years, Moody's added.

First Published: Mon, June 10 2019. 11:05 IST