 "RBI extends debt recast benefit to NBFCs")
The Reserve Bank of India (RBI) on Thursday decided to extend the asset classification benefit of restructured assets, which is enjoyed by banks, to non-banking finance companies (NBFCs).
Till now, any debt restructuring undertaken by NBFCs were classified as non-performing and attracted higher provisioning. Banks, even after recasting a debt, are allowed to treat it as a standard asset and required to make a provision of five per cent, as compared to 15 per cent provisioning required for sub-standard assets.
“NBFCs being part of the financial institutions that lend to various sectors, also undertake restructuring of advances, either as part of a consortium or otherwise. It has, therefore, been decided to harmonise the guidelines on restructuring of advances with that of banks,” RBI said in a statement.
The other recommendations include relaxation or extension of commencement of projects to not amount to restructuring for infrastructure, non-infrastructure and corporate real estate projects. The central bank also said a special classification benefit would be provided to corporate debt restructuring cases, including small and medium enterprises, until the end of March 2015.
Till now, any debt restructuring undertaken by NBFCs were classified as non-performing and attracted higher provisioning. Banks, even after recasting a debt, are allowed to treat it as a standard asset and required to make a provision of five per cent, as compared to 15 per cent provisioning required for sub-standard assets.
“NBFCs being part of the financial institutions that lend to various sectors, also undertake restructuring of advances, either as part of a consortium or otherwise. It has, therefore, been decided to harmonise the guidelines on restructuring of advances with that of banks,” RBI said in a statement.
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However, the regulatory leeway from both banks and NBFCs will be taken away from April 1, 2015, in line with the recommendation of the Mahapatra committee on restructured assets.
The other recommendations include relaxation or extension of commencement of projects to not amount to restructuring for infrastructure, non-infrastructure and corporate real estate projects. The central bank also said a special classification benefit would be provided to corporate debt restructuring cases, including small and medium enterprises, until the end of March 2015.