The banking sector continues to be under pressure and recent demands of bankers to the RBI governor reflected just that.
NDTV learns that some relief for bankers may be on the way as the Reserve Bank of India (RBI) is considering giving banks a leeway on the restructuring of loans.
Only days after bankers expressed concerns about delays in repayment of larger corporate loans, the RBI may just provide some more relief to the banking sector.
NDTV learns from sources that the central bank may extend the deadline for restructuring loans to December 31, a grace of six months, as bankers said there were delays especially in the infrastructure sector. But the relief may bring in greater scrutiny if the RBI does give an extension.
OP Bhatt, chairman of SBI, said, “There have been delays in restructuring loans that include multiple lenders for some big loans the process was started but could not be complete. We have requested the RBI to extend the deadline to December.”
Indian banks restructured Rs 65000 crore worth of assets in FY09 keeping non-performing assets (NPAs) under check, but analysts say that the huge increase in restructured standard loans points out the deterioration in asset quality. Adding up the NPAs as well as the restructured loans showed an increase of 149 per cent in gross impaired loans last fiscal and a further extension will allow banks to under report NPAs reflecting poorly on the transparency of banks.
Himendra Hazari, an analyst at Karvy Stock Broking, said, “The real problem is asset quality, which is not immediately discernable because of the huge quantum of loans restructured. The gross NPAs could be double and net NPAs triple if these were added. If the extension is given the asset quality is likely to deteriorate.”
Meanwhile, even as the bankers urge that given the economic slowdown it is only fair to permit banks the flexibility to buy time especially for longer duration loans, the fear is that these restructured loans may not be viable even in the long term and could then bunch up as bad debt.