Monday, February 12, 2018
Stop Restructure of Loans
RBI has taken bold step by banning all laws and instructions related to restructure of bad loans prevalent in banks.This will plug the hole which bankers hitherto used liberally to conceal their sins , which they used to inflate profits , which they used to protect borrowers, which they used for window dressing financial statements of banks and which they used to shield politicians . Now it is sure that if new guidelines are put in effect honestly by all banks , I have no doubt that majority of hidden NPA will come on the surface in a year or two .
However the adverse impact of the new guidelines will be maximum on credit growth and GDP growth. Bankers will be fully exposed and when they are trapped they will expose black sheep in political circle also. Bankers will put all their might in recovery of bad loans to protect them from sword of RBI and GOI. Almost all banks will be in loss for few quarters and government will have to infuse more and more capital to protect life and image of banks as well as that of government.
Banks will now focus on quality of lending and refrain from boosting credit growth by unfair means. Now inter bank unhealthy competition will stop and there will be mutual cooperation among various banks foe quality based growth . They will stop giving undue concessions to bad borrowers only to increase business and to achieve target for getting their career grow faster even by compromising lending principles.
Bank officers will now have to work hard for survival and politicians will stop exploitation of banks for vote bank at least to some extent. God bless all bankers.
I PRAISE THE HARD DECISION TAKEN BY RBI FOR IMPROVING HEALTH OF BANKS.
FOLLOWING is the key point of latest guideline issued by RBI. Once again I praise the steps taken by RBI to stop fake restructuring taking place in banks for years and decades. As soon as truth of bad debts emerges, government as also RBI will be in a position to handle menace of NPA in better way. Healthy culture will replace persistent bad culture of banks. Black sheep sitted on top post will now become cautious or face the consequences.
The Reserve Bank of India (RBI) on Monday precluded chances of banks reporting divergent asset classification norms on the same account by stating that if in a consortium a bank faced default, others must start taking action to recover the dues.
This is part of a revised framework on resolving stressed accounts, put up late on Monday night on the RBI website.
The framework did away with many existing guidelines on stressed accounts while simplifying them under a single code. This means the RBI’s existing norms on Scheme for Sustainable Structuring of Stressed Assets (S4A), ownership norms on stressed accounts, guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP), Strategic Debt Restructuring Scheme (SDR) and such myriad of schemes are now part of a simpler, easy to reference, scheme.