Banks need 20% incremental provisioning for 50 large NPAs
Banks may need to do an incremental provisioning of 20 per cent for 50 large stressed accounts to absorb any losses, says a report. These 50 large accounts are from the sectors such as construction, power and metals, among others and constitute about half of the gross non-performing assets of the banking sector.
Mumbai : Banks may need to do an incremental provisioning of 20 per cent for 50 large stressed accounts to absorb any losses, says a report. These 50 large accounts are from the sectors such as construction, power and metals, among others and constitute about half of the gross non-performing assets of the banking sector.
“Banks may require an incremental provisioning of 20 per cent against cumulative debt of 50 large stressed assets worth over Rs 4.3 lakh crore,” says a joint report by Assocham and rating agency Crisil.
While banks may have already provisioned for a part of these exposures, they need to adequately capitalise to absorb such losses which could fuel credit growth and support the next leg of economic growth, it said. On Insolvency and Bankruptcy Code (IBC),
the report said there is a need to address various challenges such as inter-credit conflicts, ability of large corporates to delay the recovery process and burden on the National Company Law Tribunal (NCLT)/ Debt Recovery Tribunal (DRT).
Roll-out of the ecosystem including adequate number of tribunals, insolvency professionals and information utilities, a limited timeline for the formulation of resolutions and access to the secondary market are needed in case of liquidation for successful implementation of the IBC, it said.
