As the global slowdown has crept into the economy, bankers feel that in more loans are going to turn bad in the coming quarters and therefore they want RBI to relax the deadline for loan reconstruction.
Some leading bankers in the industry feel that the impact of slowdown in the economy would be seen only after some time and thereby the sectors that will be affected most will include textiles, real estate, retail, exports and auto.
Anticipating such a situation bankers said that although they will undertake all the possible options in the coming quarters to prevent the asset from falling into the sub-standard category, yet they want RBI to step forward to handle the situation.
Bankers want RBI to relax the deadline for recasting of loan repayment in order to avoid the loans given to the corporates to turn into non performing assets (NPAs). Earlier the apex body had asked banks to restructure their bad loans up to June 30th, 2009 if they had ‘initiated restructuring' of accounts before January 31st, 2009.
Banks however wanted an explanation on initiating restructuring from the RBI to prevent future hassles. "We have sought a clarification to avoid a dispute with auditors in future. Auditors should not claim that we restructured an account, against RBI norms," they said.
The loan assets of the banks have been constantly fading from the past few months. In fact some leading banks have reported a rise in their bad loans as on the quarter that ended on December 31st. For instance the gross NPAs of the largest lender, State Bank of India (SBI), rose to Rs 13,314 crore during this quarter as compared to Rs 11,182 crore in the same quarter during the last fiscal.
Similarly the largest private lender, ICICI Bank witnessed its NPAs rising from Rs 6,474 crore to Rs 8,988 crore. The NPAs for Canara Bank also increased from Rs 1,524 crore to Rs 2,515 crore during this quarter.
Bankers have expressed their concerns over the rising NPAs in their meeting with the RBI Governor D Subbarao on the third quarter review of monetary policy on January 27th.