 "RBI reviews SDRs, JLF scheme with lenders")
Staying on drive to clean up lender’s books, Reserve Bank of India today discussed with banks and finance companies use of Strategic Debt Restructuring Scheme (SDRs) and Joint Lenders Forum (JLF) to manage stressed assets and steps to plug gaps.
Besides Governor Raghuram Rajan, Deputy Governors R. Gandhi and S.S. Mundra and senior RBI officials held a meeting with senior executives of major banks, NBFCs and Asset Reconstruction Companies (ARCs) to discuss the current challenges in management of stressed assets in the banks’ books and the implementation of the various measures taken by the Bank in this regard.
The meeting reviewed the working of the Joint Lenders' Forum (JLF) Mechanism, Flexible Restructuring of Long Term Project Loans, Strategic Debt Restructuring Scheme and regulations on sale of assets by banks to Asset Reconstruction Companies, RBI said in a statement.
According to Financial Stability Report (FSB) released in December 2015, the Gross non-performing advances (GNPAs) of scheduled commercial banks (SCBs) as percentage of gross advances increased to 5.1 per cent in September 2015 from 4.6 per cent in March 2015. The restructured standard advances as percentage of gross advances declined to 6.2 per cent from 6.4 per cent, while the stressed advances ratio rose to 11.3 per cent from 11.1 per cent during the same period, according to FSB. Rating agency India Rating in its report on SDRs said Strategic Debt Restructuring (SDR) Scheme is likely to provide only a temporary breather to stressed companies. The improvement in their debt protection measures, if any, will be minimal because their debt to market capital very high.
Besides Governor Raghuram Rajan, Deputy Governors R. Gandhi and S.S. Mundra and senior RBI officials held a meeting with senior executives of major banks, NBFCs and Asset Reconstruction Companies (ARCs) to discuss the current challenges in management of stressed assets in the banks’ books and the implementation of the various measures taken by the Bank in this regard.
The meeting reviewed the working of the Joint Lenders' Forum (JLF) Mechanism, Flexible Restructuring of Long Term Project Loans, Strategic Debt Restructuring Scheme and regulations on sale of assets by banks to Asset Reconstruction Companies, RBI said in a statement.
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The thrust of discussion was on how tool were being used and the improvements needed to sharpen their efficacy and ease of use. Bankers and industry professionals made suggestions, which RBI said it would examine to tone up working. Several suggestions were made by the participants on the way forward which will be examined. RBI wants banks to clean up their books by March 2017. In effect, it means banking regulator wants banks to recognize weak assets and make provisions for them. It may put pressure on bank bottom-line in the short-term.
According to Financial Stability Report (FSB) released in December 2015, the Gross non-performing advances (GNPAs) of scheduled commercial banks (SCBs) as percentage of gross advances increased to 5.1 per cent in September 2015 from 4.6 per cent in March 2015. The restructured standard advances as percentage of gross advances declined to 6.2 per cent from 6.4 per cent, while the stressed advances ratio rose to 11.3 per cent from 11.1 per cent during the same period, according to FSB. Rating agency India Rating in its report on SDRs said Strategic Debt Restructuring (SDR) Scheme is likely to provide only a temporary breather to stressed companies. The improvement in their debt protection measures, if any, will be minimal because their debt to market capital very high.