NEWS & ADVICE : FIXED DEPOSITS
Target date for 70% provision coverage ratio to be shifted further
By Neelima Shankar
Apr 23, 2010
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The Reserve Bank of India may extend the time set for banks to meet the 70% provision coverage ratio. The date for the same has been scheduled for September 2010 so far.

RBI Deputy Governor, Shyamala Gopinath has told analysts in a call conference that they are into consideration regarding the issue that it might require some banks a more longer duration to achieve the 70% provision coverage ratio target. She said that the apex bank is considering the matter on a case to case basis.

Provision coverage ratio is the amount of money that banks need to keep aside as provision in case of non performance of a loan.

It is said by the banking community that it would not only be difficult for small banks but also for the banking majors like State Bank of India, ICICI Bank and Canara Bank to meet the target in the next six months.

SBI had earlier defended its lower provision ratio saying that most of its NPAs were in the sub standard category and had not resulted into losses. But this time the RBI has demanded more disclosure from banks regarding NPAs.

The Deputy Governor also said that there would be enough liquidity maintained in the system so as to ensure that the interest rates lie between repo and reverse repo rates.

"We would like the operative rate to be in the middle of the liquidity adjustment facility corridor but that is difficult to maintain. We would ensure that the call rate is within the LAF corridor but it is not clear that we will definitely maintain it at the reverse-repo level," Mr Subbarao said.

 


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