The Reserve Bank of India (RBI) will meet the country’s top bankers on 4 April for the pre-policy discussions in which the later will request deferring of the higher provisioning norms that comes to effect from 1 April.
In addition, the recent RBI norms which have increased the threshold level of deposit to Rs 1 crore, from Rs 15 lakh, for the purpose of classification as bulk deposit, is hurting the retail savers and the norm needs to be reversed, bankers said.
RBI governor D Subbarao, along with four deputy governors, will meet the bankers for the pre-policy interaction. The annual monetary policy review of RBI will be announced on 3 May.
"We have seen deposit growth falling much below credit growth for the last two years. Banks deposits are losing sheen to small savings schemes, liquid mutual fund schemes. The recent guidelines which mandated Rs 1 crore and above deposit as bulk deposit needs to be reversed to attract more depositors," said Pratip Chaudhuri, chairman, State Bank of India.
Bulk deposit offers a premium of around 10-25 bps over the card rate which is offered to retail deposits. "We will request the regulator for maintaining the earlier norms of Rs 15 lakh for the classification of bulk deposit," Chaudhuri said.
He also said the minimum tenure of deposit to be classified as fixed deposit, which is mandated at 7 days, needs to be reduced to 3 days.
Banks will also ask the regulator to defer the higher provisioning norms on standard restructured advances.
Following the recommendations of the B Mahapatra committee, which was set up to study the issues regarding debt recast, the banking regulator has decided to increase the provisioning requirement for fresh restructured loans from 2.75% to 5% from 1 April, 2013.
In addition, for the existing stock of restructured assets, it was decided to increase the provision from 2.75% to 5% in a phased manner, that is, to 3.75% spread over the four quarter of 2013-14 and then to 5% over the four quarters of the next financial year. The Mahapatra committee has suggested withdrawal of the regulatory leeway given to loan recast which meant all loans that are restructured will cease to be classified as standard asset and banks have to mark those as subs-standard asset. Sub-standard asset, that is loans that are backed by collateral, attracts provisioning of 15%.
Banks wants deferment of these stricter norms amid rising restructured loans, and a higher provisioning on such loans will put pressure on their bottomline.
The ratio of restructured standard advances to gross advances has almost doubled in one year for public sector banks. According to data compiled by the finance ministry, restructured standard advances ratio increased to 7.41% in December 2012 from 3.46% a year back. Gross NPA ratio of public sector banks have increased to 4.18% from 3.22% during the same period.
According to bankers, foreign banks are likely to take up the issue of priority sector lending norms with RBI and will ask for more time to comply with the norms. Following the recommendations of the Nair Committee, RBI has decided that foreign banks should similar priority sector lending obligations with that of Indian lenders.
According to the revised guidelines on priority sector lending, RBI has mandated higher target foreign banks with more than 20 branches in the country. These banks need to lend 40% of their net credit (similar to Indian banks) to the priority sector instead of 32%. They will also have sub-targets and five years time, starting from April, 2013, was given to foreign banks, to meet the new guidelines.
In addition, RBI had removed priority sector tag for certain loans, like export refinance, in which foreign banks were very active. According to bankers, request will be made to RBI for include such loans under priority sector.
