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New NPA resolution norms outcome oriented, flexible: RBI
Mumbai, April 18 (IANS) Defending the Reserve Bank of India’s (RBI) norms on resolution of banks’ non-performing assets (NPAs), or bad loans, announced in February, RBI Deputy Governor N.S. Vishwanathan on Wednesday said these are outcome-oriented and provide banks the flexibility on deciding the contours of resolution.
Delivering a lecture titled “It is not Business as usual for Lenders and Borrowers” at the National Institute of Bank Management in Pune, he also cautioned banks on being overcome by a herd mentality in seeking to grow retail credit and the personal loan segment as a way out of their problem with corporate bad loans.
As per the RBI’s revised framework on NPAs, banks are required to classify even a day’s delay in paying loan instalments as a default.
“Some concerns have been expressed that the 1-day default clause is onerous,” Vishwanathan said, according to the speech copy uploaded on the RBI website.
“These concerns are not well founded. For cash credit account, the 30-day trigger has been retained. For term loans, where the repayment schedules are predetermined, borrowers need to and indeed have enough notice to arrange funds in time. It is a behaviour change in repayment of credit that has to come about,” he said.
“The date shows that a large number of borrowers, even some highly rated ones, have failed on the 1-day default norm. This has got to change. If borrowers fail to pay on the due date because of a cash flow problem, banks should see that as an early warning indicator warranting immediate action,” he added.
The RBI official also said the revised norms provide as much flexibility as possible to lenders and the stressed borrowers so long as a credible resolution plan is implemented within a specified time frame.
“If lenders and the stressed borrowers are unable to put in place a credible resolution plan within the timelines, then the structured insolvency resolution process under the IBC (Insolvency and Bankruptcy Code) should take over,” he said.
Vishwanathan cautioned banks that there were risks as well in expanding retail credit, which needed to be properly assessed, priced and mitigated.
“There appears to be taking hold a herd movement among bankers to grow retail credit and the personal loan segment. This is not a risk-free segment and banks should not see it as the grand panacea for their problem riddled corporate loan book,” he said.
The accumulated NPAs in the Indian banking system have crossed the staggering level of Rs 9 lakh crore.
The RBI has decided to do away with the Joint Lenders’ Forum (JLF) as an institutional mechanism for resolution of stressed accounts.
Banks have represented to the RBI for relaxing the norms issued under the revised framework. Industry too has requested for relaxation.
According to the Association of Power Producers (APP) last month, the government proposes to recommend that the RBI make some relaxation in its norms on NPAs, failing which up to 70,000 MW of power projects would go under bankruptcy proceedings.
–IANS
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Dr. Abhishek Verma Dedicates a Shelter in Memory of His Mother, Veena Verma, at KGMU; Inaugurated by Daughter Nicolle Verma
World-renowned business tycoon Dr. Abhishek Verma has supported Foodman Vishal Singh’s Hunger-Free World mission. In memory of his mother, Late Veena Verma, who was a 3 term Rajya Sabha MP.
Dr. Verma dedicated a state-of-the-art free permanent shelter for the attendants of patients at KGMU Medical University, Lucknow, under the aegis of Vijay Shree Foundation. His daughter, Nicolle Verma, inaugurated the shelter.
During the event, Foodman Vishal Singh honored Nicolle Verma by presenting her with a memento. Mrs. Nidhi Sharma and Avantika Yadav, associated with the organization, welcomed her with garlands. Following this, Nicolle Verma distributed essential items to the attendants and also handed out fruits. She became emotional remembering her grandmother on her birth anniversary.
On this occasion, she also inaugurated the “Veena Verma Sevalaya” in memory of her grandmother, Veena Verma, to serve the attendants. She expressed, “I feel proud that my family is engaged in nation-building as well as social service. Today, in collaboration with Vijay Shree Foundation founder Foodman Vishal Singh Ji, I feel immensely proud to dedicate this shelter for the poor, helpless, and needy attendants of patients battling serious illnesses like cancer. I am honored to be associated with the Hunger-Free World Mission for humanity.”
Inspired by the continuous humanitarian service provided by Vijay Shree Foundation over the past 17 years, Nicolle Verma donated 10 lakh rupees to support the cause. The purpose of this donation is to ensure that services continue for the needy attendants of patients suffering from severe illnesses in hospitals, as facilitated by Foodman Vishal Singh.
It is noteworthy that Dr. Abhishek Verma’s family has a legacy of public and philanthropic service. They are helping millions to carry forward the values and service work of their parents. On the occasion of his mother’s birth anniversary, Dr. Abhishek Verma dedicated this state-of-the-art permanent shelter at Lucknow Medical College to serve the attendants of patients through the Vijay Shree Foundation.
Supporting Foodman Vishal Singh’s Hunger-Free World mission, Dr. Abhishek Verma assured that he would continually support keeping this flame of humanity alive. He also promised to assist in providing medicines to the helpless patients.
Continuing her grandmother’s legacy of service, Nicolle Verma personally served food to the needy patients and attendants. She said, “It is our good fortune to have received the joy of doing this noble work today through Foodman Vishal Singh. I have taken another step forward in carrying my family’s values and cooperation by joining hands with the Vijay Shree Foundation. My father taught me to serve and help the needy, and I feel happy when I bring a smile to someone’s face.”
On the birth anniversary of the late Veena Verma, the event organizer, Vijay Shree Foundation founder Foodman Vishal Singh, said, “We feel proud and happy that Dr. Abhishek Verma, a globally renowned business tycoon, has extended his support to uplift our country from the hunger index. Today, on his mother’s birth anniversary, he inaugurated a state-of-the-art permanent shelter at Lucknow Medical College, which will always be helpful for the needy attendants of patients. It is a pleasure for me and the organization to receive the affection of Mr. Verma.”
The event was attended by General Manager Verma Family Office Hemant Garg, Sonu Rajput, and the organization’s volunteers, including Sandeep Singh, Parmeshwar Ji, Prashant Rao Gautam, Balram Singh, Ramesh Chaudhary, Suman, Jeetu, Anil, Suraj, Vinay, Manish Bhadauria, Manas Mehrotra, Vivek, Apurv, Happy, and others.