Risk provisioning

The stability of the banking system should be paramount

Draft norms on provisioning pertaining to advances for projects under implementation have stirred up a storm in the banking sector. Commercial banks, as reported by this newspaper, are planning to write to the Reserve Bank of India (RBI) to seek relaxation. The government is also reportedly studying the proposed norms, while banks’ and non-banking financial companies’ (NBFCs’) stock prices have taken a knock. The RBI last week proposed to increase the provisioning for project finance to 5 per cent from the existing level of 0.4 per cent. Commercial banks are willing to settle for 1-2 per cent. Notably, the RBI