Mumbai: Top bankers on Wednesday sought more clarity from RBI about classification of bad accounts and demanded that they be given flexibility in dealing with restructured loans.
"Today, there is a lot of mystery about what is a restructured asset. Everything restructured is seen as equivalent to NPA (non-performing asset) ... the restructuring definition should have a timeline," State Bank of India Chairman Pratip Chaudhuri told reporters outside the RBI headquarters after a two-hour-long meeting with the Reserve Bank officials.
"We wanted that RBI gives clear guidelines so that when the auditors come in there is no confusion and there is no divergence in approach," he added.
The Chairman of the largest lender, which in December reported a near 90 per cent spike in NPA provisions, said the banks pointed out to RBI that after the probation period, if an account performs alright, it should not be branded as restructured for all the time.
Chaudhuri attended a specially-convened meeting with RBI Deputy Governor K C Chakrabarty called to assess the bad asset situation in the banking system.
Chaudhuri further said the classification of a recast account is a "gray area" now and hence banks have requested for a timeline of a year-long regular repayment by the restructured account to turn it as a standard asset.
It can be noted that a re-classification of accounts will help banks conserve capital as a restructured account demands more provisioning as opposed to a standard one. Due to elevated interest rates and general economic slowdown, many borrowers have been unable to service their debt obligations and have been undergoing restructuring.
Sectors like textiles, state-run power distribution companies (discoms), aviation, steel, mining, telecom tower business, among others, are facing difficulty due to project delays and higher debt servicing costs.
Chaudhuri said a re-classification into becoming a standard asset is in sync with global banking standards. He also said a committee appointed by the RBI is looking into the issue at present.
He said RBI asked banks to carry out restructuring in case of smaller accounts as well but added that it is difficult operationally given the nature of the borrowers.