BY S.K Iyer
The Reserve Bank of India, in a circular issued in 24 April 2019, has asked bank and financial institutions to disclose in their 'notes to accounts' details of defaults made by the Infrastructure Leasing & Financial Services (IL&FS) and IF & FS entities, and provisions that they need to be make for the same.
The National Company Low Appellate Tribunal (NCLAT) has currently barred the banks and financial institutions from classifying IL & FS defaults as Non-Performing Assets(NPA) without prior approval from it.
The Reverse Bank of India circular on 24 April is proactive assessment that the central bank has taken just in time before banks announce their March quarter earnings.
This is also in line with the submission it made before the NCLAT, which barred the banks from classifying IL & FS group debt as NPA without is prior approval pending order from the appellate tribunal, RBI has referred to the restarting NCLAT order of February 25, asked banks to disclose the details in a specific format - to declare the amount outstanding, total amount of exposure that are stressed loans, provisions required loans, provisions required to be made as per Income Recognition norms, and provisions actually held.
As per the regulatory norms, banks have to recognise any account that has defaulted for over 90 days and set aside provisions for the same.
Bank as a prudent measure, may provide for the loans without technically declaring the IL & FS exposure an Non Performing Assets. Some banks have already made contingency provisions during September as well as December quarter results, even while they held the accounts to be "standard".
Of the IL & FS group's outstanding debt of Re.94,216 crore, public sector banks have an exposure of Re.35,382 crore, other banks Re.9,436 crore, foreign banks Re. Re.6.031 crore and other financial institutions Re.9,138 crore.
The Reserve Bank of India, in a circular issued in 24 April 2019, has asked bank and financial institutions to disclose in their 'notes to accounts' details of defaults made by the Infrastructure Leasing & Financial Services (IL&FS) and IF & FS entities, and provisions that they need to be make for the same.
The National Company Low Appellate Tribunal (NCLAT) has currently barred the banks and financial institutions from classifying IL & FS defaults as Non-Performing Assets(NPA) without prior approval from it.
The Reverse Bank of India circular on 24 April is proactive assessment that the central bank has taken just in time before banks announce their March quarter earnings.
This is also in line with the submission it made before the NCLAT, which barred the banks from classifying IL & FS group debt as NPA without is prior approval pending order from the appellate tribunal, RBI has referred to the restarting NCLAT order of February 25, asked banks to disclose the details in a specific format - to declare the amount outstanding, total amount of exposure that are stressed loans, provisions required loans, provisions required to be made as per Income Recognition norms, and provisions actually held.
As per the regulatory norms, banks have to recognise any account that has defaulted for over 90 days and set aside provisions for the same.
Bank as a prudent measure, may provide for the loans without technically declaring the IL & FS exposure an Non Performing Assets. Some banks have already made contingency provisions during September as well as December quarter results, even while they held the accounts to be "standard".
Of the IL & FS group's outstanding debt of Re.94,216 crore, public sector banks have an exposure of Re.35,382 crore, other banks Re.9,436 crore, foreign banks Re. Re.6.031 crore and other financial institutions Re.9,138 crore.
No financial institution will declare the accounts of IL and FS or its entities as non-performing assets without its prior permissionsNational Company Law Appellate Tribunal
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