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IBC needs improvement, banks' NPA stable in June quarter: RBI

The stressed assets situation "looks manageable" as the stock of gross non-performing assets (NPAs) remained stable even after the second wave of pandemics. Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said in a conference organized by The Indian Express and the Financial Times. The banking system's gross NPAs were at 7.5 per cent while the same for non-bank lenders were even lower, the RBI Governor told.

"According to the numbers, which we have, currently the NPA levels look manageable. The last date, as at the end of June, for the banking sector is about 7.5 percent GNPA and (for) NBFCs, it is little less than that," Das said.

The RBI Governor explained that the loan restructuring schemes for small borrowers introduced in August last year and May this year are not open-ended, as they insist on having to start and ending dates.

Further, he also ask banks to set aside money as provisions amounting to 10 percent of the outstanding upfront, so that in case some asset goes back, they have the provisions to take care of it.

Meanwhile, addressing a question on the high haircuts taken by banks in resolution to some bankruptcy cases, Das said the Insolvency and Bankruptcy Code (IBC) process needs some improvement which will include some legislative changes as well.

"Yes, I agree that there is scope for the improvement in the functioning of the IBC and framework. There is perhaps need to certain legislative amendments also," Das said.

The RBI has certain suggestions which it has flagged to the government, he said, citing an example of the time taken before a case is admitted in a National Company Law Tribunal (NCLT) and comes up for resolution through court-directed measures and suggested that the same can be dealt with through legal amendments.

He said the overall recoveries from the IBC process used to be at 45 percent at the aggregate level four years ago and have come down to 40 percent in the pandemic year, and also acknowledged that in some cases, lenders have had to take deep haircuts of up to 90 percent.

"There is scope for some improvement and the time taken in the entire process I entirely agree needs to be reduced by simplifying certain procedures and wherever necessary by carrying out legislative change," Mr. Das explained.


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