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RBI checking readiness of banks against NPA shocks

By Religare
RBI checking readiness of banks against NPA shocks
The Reserve Bank of India (RBI) has started checking the readiness of Indian banks against any unexpected event and has sought information on adequacy of collateral and securities on corporate loans, a media report said.

It said that a small private bank confirmed the development while admitting that it was to ensure banks had adequate collateral for loans when they went for recoveries.

The move came on the backdrop of rising NPAs in the banking sector, up to 85 per cent rise in bad loans reported since April 2012, as companies fail to meet their financial obligations.

During the first-half of current fiscal, banks referred a record number of 74 CDR cases, involving a total debt amount of Rs 40,000 crore for restructuring.

So, adequate cover has become very important, in the form of collateral, as more and more companies are going for debt recast.

The inadequate collateral in case of Kingfisher Airlines, which has debt of Rs 7,500 crore, has made the issue critical. The problems with loans to Deccan Chronicle and Suzlon have added to the concern.

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