Uttar Pradesh, India (PressExposure) July 13, 2009 -- The leading banks of India have asked the Reserve Bank of India (RBI) to ease the provisioning norms related to home loans and other assets. Such term is putted against RBI at the time when the banks in the country are suffering from rising debts.
According to the banking players, if a borrower fails to pay off all the EMIs of a loan then, according to the accounting norms, the bank has to take action against his/her other loans also. For eg, if a borrower is not repaying the credit card dues then all other loans taken by that borrower will be declared as non-performing assets by the bank, despite of the fact that the borrower might be paying regular EMIs for home and auto loans on time.
Looking at the fact that banks earnings are affected by the current provisioning norms, the banks are asking RBI to separate the loans in the categories of good loan and bad loan.
While participating in the meeting with RBI governor, D Subbarao, the CEOs of different large banks suggested this step. The suggestion comes at the time when many banks in India are seeing the slow credit growth. The corporate loans ratio is not rising for past some time and retail is becoming a good option for the banks.
According to the current RBI guidelines, if a borrower defaults in repaying one loan then the bank will consider any other loan also as the bad loan and following that 10% of the outstanding loan is putted as provision, which is affecting the income of banks.
Banks are putting the demand against RBI to make new guidelines which will follow that if the borrower is a defaulter in one loan then all other loans are not considered as bad loans.