FinMin to discuss RBI's
draft project financing norms with banks, IBA
The
Finance Ministry will discuss the Reserve Bank of India's (RBI) draft project
financing norms with banks and the Indian Banks' Association (IBA) soon, said a
senior Finance Ministry official, requesting anonymity.
We
will discuss this matter with banks and the IBA, and will take it forward after
receiving comments from the banks, the senior government official said.
The
official said that although no bank has approached the government so far, the
Finance Ministry has taken note of the RBI's proposed norms to tighten project
financing and is currently studying it.
The
Finance Ministry official said banks will assess the impact of the draft rules
on their balance sheets and can approach the RBI based on their assessment.
The
banking regulator recently released draft guidelines on the Prudential
Framework for Income Recognition, Asset Classification and Provisioning
pertaining to Advances Projects Under Implementation'. The guidelines propose a
phased 5 per cent standard asset provision during the construction phase.
One
reason for the sharp increase in provision norms is the rise in non-performing
assets (NPAs) over the past decade, primarily due to many infrastructure loans
turning bad. Gross NPAs hit 11.8 per cent of gross advances by March 2018, but
have fallen over the past five years to 3.2 per cent as of September 2023.
We
are seeing that this draft regulation will increase the stress on the banks'
side and definitely have a serious impact on our business book. We are planning
to approach the Finance Ministry on this matter, said a senior public sector
bank official who does not wish to be named.
www.business-standard.com
dt. 09.05.2024