This chart shows claim settlement ratio of life insurance companies... Read On
MEMBER'S LOGINX
| Login Failure | ||||||||
|
||||||||
| Sign Up | Forgot Password? | ||||||||
- Home
- The 5 Minute WrapUp
- Chart Of The Day
- NPAs Set to Rise Further with New RBI Rules
NPAs Set to Rise Further with New RBI Rules
Feb 15, 2018
The Reserve Bank of India (RBI) has tightened the bad debt resolution framework by scrapping numerous loan restructuring programmes. This includes the likes of strategic debt restructuring scheme (SDR), Joint Lenders' Forum (JLF), Corporate Debt Restructuring Scheme, and Scheme for Sustainable Structuring of Stressed Assets (S4A) that's prevalent among banks to restructure defaulted loans. The RBI replaced all these schemes by the Insolvency & Bankruptcy Code (IBC).
With this, a loan worth over Rs 2.8 trillion, with payments outstanding for 60-90 days, carry the risk of slipping into the category of non-performing assets (NPA). This will result in a surge in NPAs and may put additional pressure on the banks to make provisions.
The new framework specifies that banks must report defaults on a weekly basis in the case of borrowers with more than Rs 50 million in bank debt. Further, for accounts with an exposure of Rs 20 billion or more, banks will have to put a resolution plan in place within 180 days after a default has been noted. If the resolution plan is not implemented within 180 days, the account must be referred to the IBC within 15 days.
The strict timelines could mean that a larger number of accounts will go into insolvency. Haircuts that banks may need to take and the probability of liquidation in some accounts may also rise. Similarly, under the new scenario, corporate lenders, which have already been under pressure due to rising bad loans and increased provisions, could take another hit.
The new framework is expected to help with early recognition and resolution of bad loans. While this may be positive for the banking sector in the long run, in the short run, banks may come under additional pressure.
Data Source: Business Standard
This Chart Of The Day was published in The 5 Minute WrapUp - What Do Fortis Healthcare and Vakrangee Have in Common?
Equitymaster requests your view! Post a comment on "NPAs Set to Rise Further with New RBI Rules". Click here!
1 Responses to "NPAs Set to Rise Further with New RBI Rules"
Equitymaster requests your view! Post a comment on "NPAs Set to Rise Further with New RBI Rules". Click here!
Our Most Popular Charts
This chart shows the top 5 countries in terms of improvement in HDI over past 2 decades... Read On
This chart shows the persistency rate of insurance policies.... Read On
-equitymaster.gif "The top 10 year multibagger stocks")
The chart shows the top 20 multibagger stocks over the past decade.... Read On
Market Indices are touching a record high. Time to tread cautiously.... Read On
OUR TOP 5 IDEAS
- Free Report: Multibagger Stock Ideas 2021
- Are You Making One of These 15 Costly Mistakes While Investing. Learn more!
- Covid-19 Proof Multibagger Stocks - Download this FREE Report Now
- Free Report: The Secret to Increasing Your Trading Profits Daily!
- No Guessing, No Hunches, and No Missed Trends Ever! Join Us on YouTube Now.
MARKET STATS
ABOUT EQUITYMASTER
Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.
FREE NEWSLETTERS
PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
- Basics of Value Investing
- Benjamin Graham
- How to Invest in Gold
- How to Invest in Silver
- Best Stocks to Buy Today
- Warren Buffett - The Value Investor
- The Best Small-cap Stocks to Buy
- The Best Bluechip Stocks to Buy
- Your Ultimate Guide to Penny Stock Investing
- 10 Rules for Successful Long-Term Investing
- How to Invest in the Share Market
- Momentum Moves
FOLLOW
APP
Copyright © Equitymaster Agora Research Private Limited.
Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
B C Chandola
Mar 8, 2018NPA WILL FURTHER RISE. BANK WILL FINANCE WITH MORE PRUDENTLY. GROWTH SPEED & EMPLOYMENT GENERATION WILL SLOW DOWN. DUE TO LOWER SUPPLY OF CREDIT INTEREST RATES ON DEPOSIT WILL GO DOWN. SLOWDOWN IN ECONOMY WILL START.