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Defaulters may have to pay higher rates, warns RBI

By Super

Defaulters may have to pay higher rates, warns RBI
Concerned over rising bad loans, the Reserve Bank said it could consider making future borrowings more expensive for willful defaulters.


Speaking at the Delhi Economic Conclave here, Reserve Bank of India (RBI) Governor Raghuram Rajan said the central bank will come out with a discussion paper next week with regard to distressed borrowers and rising NPAs.

"For willful defaulters or a new category that we call uncooperative defaulter, future borrowing will become more expensive. By uncooperative defaulter I mean those who don't work with their lenders to achieve equitable and efficient resolution of stressed assets," he said.

Rajan said there was a need to ensure that the system recognises financial distress and provide for fair recovery of loans in the interest of lenders and investors. "Next week, we propose to put out a discussion paper... The key element (will be) to deal with distressed borrower... It will focus on recognition, resolution and recovery (of assets)," he said.

Rajan said inability to deal with the problem of distressed assets will have a bearing on growth prospects.

To improve the health of the financial sector and to improve asset quality of banks, besides preventing slippages, RBI from time to time issues instructions to banks.

As per the norms, each bank is required to have a mechanism for early detection of signs of distress, including having a loan recovery policy, which sets down the manner of recovery, and monitoring of of write-off.

The ratio of top 30 NPAs as a percentage of gross NPAs, in respect of public sector banks, as on September 2013 is 35.5 per cent and for all banks it is 38.8 per cent.

The gross non-performing assets (NPA) amount of top 30 accounts of PSBs stood at Rs 72,174 crore, while for all banks it was Rs 91,667 crore at the end of September, 2013.


Read more about: rbi raghuram rajan npa defaulters
Story first published: Thursday, December 12, 2013, 9:59 [IST]
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