Several banks — mainly state-owned banks -- have requested the Reserve Bank of India for a quarter’s deferment of additional provisioning for cases under the June 7 circular for stressed assets, three bankers familiar with the matter told CNBC-TV18.
“Many of the cases could not be heard in the NCLT due to the lockdown, so we have asked for some more time till the dust settles down,” said one of the bankers, who did not want to be named.
Most private banks have not sought this relief from the RBI, as per executives CNBC-TV18 spoke to.
Reserve Bank’s “Prudential Framework for Resolution of Stressed Assets”, or the “June 7 circular” as it is more popularly called, requires banks to recognise stress, and initiate a review of default within 30 days. Banks are allowed 180 days’ time after the 30-day review period, to implement a resolution plan. If this fails, they have to hold higher provisioning of 20 percent as a punitive measure, and another 15 percent on top of the additional 20 percent if the resolution is stalled for over 365 days. This is applicable for all large accounts which have a system-wide exposure of over Rs 2,000 crore effective June 2019 and for all accounts over Rs 1,500 crore effective January 2020.
The 180-day deadline to resolve cases before the additional 20 percent provisioning kicks in, ended in January for the first set of cases under the purview of this circular, which were stressed as of June 2019. Therefore, under RBI norms, banks have to make the additional provisioning in the March quarter itself.
Dewan Housing Finance Ltd, Cafe Coffee Day Enterprises, Cox & Kings, Altico Capital and others are accounts which fall under the circular.
CNBC-TV18 could not ascertain the total additional provisioning requirement for the industry, as different banks have different levels of provisioning as per their own policies, over and above the minimum 15 percent level that RBI mandates for non-performing assets.
State Bank of India, for instance, disclosed in its December quarter results that it was required to take on additional provisioning of Rs 1,109 crores for large accounts (with over Rs 2,000 crore industry-wide exposure) under the RBI’s June 7 circular.
SBI said it had 15 accounts with a total exposure of Rs 13,775 crores where viable resolution plans were discussed but implementation would likely take longer than 180 days. For these 15 accounts, the bank would be required to take additional provisioning of Rs 853 crores, as per its analyst presentation.
Similarly, it had 9 accounts with Rs 8,447 crore exposure where the resolution plan was not implemented and they were referred to NCLT, as of the December quarter. For these 9 accounts, the bank would be required to take additional provisioning of Rs 256 crores.
CNBC-TV18 has written to RBI for its comments, and will be updating this copy once we get those.