Loan recasts at all-time high: RBI steeply hikes banks provisioning for CDR assets
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As requests for loan recasts hit all -time high and are set to top Rs 3.25 lakh crore this fiscal, RBI today sharply raised the provisioning for restructured assets to 2.75 per cent from earlier 2 per cent, a move that will hit the bottomlines of banks by around 4 per cent.
"It has been decided to increase, with immediate effect, the provisioning for restructured standard accounts from the existing 2 per cent to 2.75 per cent," the RBI said in its Second Quarter Review of the Monetary Policy.
Detailed guidelines in this regard will be issued shortly, it added.
According to the central bank data, the corporate debt restructuring or CDR cases jumped to a high of 392 as on March 2012 from 225 in March 2009, taking the amount at stake to Rs 2,06,493 crore from Rs 95,815 crore.
Reacting to the development, the BSE Bankex slid nearly 3 per cent, led by losses in state-run banks like SBI, BoB, BoI, PNB, IOB among others, which lost nearly 3 per cent mid-session. Even private lenders were hit with HDFC, ICICI, Axis among others losing over 2 per cent, while the benchmark Sensex shed nearly 1 per cent mid-session as the RBI poured cold water on rate cut hopes.
According to analysts, the RBI tightening will shave nearly 4 per cent off bank's bottomlines.
The current fiscal has seen further spurt in CDR cases with the first quarter alone seeing nearly 30 cases totalling worth over Rs 40,000 crore.
The second quarter also witnessed major spurt in CDR cases with all the stats-run banks which have announced their Q2 earnings reporting massive spike in CDR assets.
The RBI move will dearly impact the banks, especially PSBs, which have witnessed an unprecedented rise in loan restructuring due to economic stress of their borrowers.