28-10-09
New Delhi: The Reserve Bank’s decision to ask banks to keep
higher provisioning for non-performing assets means that banks
now have to make an additional
provisioning of Rs 13,000 crore
till September end next year, rating agency Crisil said.
“Crisil estimates that the proposed
minimum coverage for
NPAs will mean that banks now
have to make an additional
provisioning of Rs 130 billion
till end-September 2010,”
the rating agency said in a release.
Its estimate is based on the NPAs reported by banks
as on March 31, 2009.
The NPAs were at 2.3 per cent of
system advances, while the NPA coverage was
around 55 per cent as on that date.
Yesterday, in its quarterly policy review,
Reserve Bank has asked banks
to ensure that their provision coverage
ratio reaches 70 per cent
by September end 2010.
Provision coverage ratio
is the percentage of loan
that a bank would lose if it
has to write off that account.
Crisil said that the measure will
enhance the resilience
of the banking system to absorb loan losses.
However, it will also lead to a decline in the sectors
profitability over the near term.
The measure should also increase
the consistency in banks
provisioning for NPAs and facilitate
a more meaningful
comparison of their profits, the rating agency said.
New Delhi: The Reserve Bank’s decision to ask banks to keep
higher provisioning for non-performing assets means that banks
now have to make an additional
provisioning of Rs 13,000 crore
till September end next year, rating agency Crisil said.
“Crisil estimates that the proposed
minimum coverage for
NPAs will mean that banks now
have to make an additional
provisioning of Rs 130 billion
till end-September 2010,”
the rating agency said in a release.
Its estimate is based on the NPAs reported by banks
as on March 31, 2009.
The NPAs were at 2.3 per cent of
system advances, while the NPA coverage was
around 55 per cent as on that date.
Yesterday, in its quarterly policy review,
Reserve Bank has asked banks
to ensure that their provision coverage
ratio reaches 70 per cent
by September end 2010.
Provision coverage ratio
is the percentage of loan
that a bank would lose if it
has to write off that account.
Crisil said that the measure will
enhance the resilience
of the banking system to absorb loan losses.
However, it will also lead to a decline in the sectors
profitability over the near term.
The measure should also increase
the consistency in banks
provisioning for NPAs and facilitate
a more meaningful
comparison of their profits, the rating agency said.
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