Looking at bank powers to tackle stressed assets: RBI

India's banks, grappling with more than $110 billion of stressed loans, are facing criticism over their use of SDR

The Reserve Bank of India (RBI) will examine how the country's banks are using provisions they were given to help tackle a crippling bad debt burden, governor Raghuram Rajan said on Friday.

India's banks, grappling with more than $110 billion of stressed loans, are facing criticism over their use of one of the most high profile tools offered to the sector by the RBI - strategic debt estructuring (SDR), which helps banks swap unpaid debt for majority control.

Crucially, SDR allows debt in the process to be classed as "standard", without extra provisions or writedowns, for 18 months.

"We have spent much of the last few quarters creating a variety of bank powers to deal with stressed assets. SDR is just one of them," Rajan said.

 

"Having given those powers, we are now looking at how those powers are implemented."