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RBI supplies restricted provisioning aid for unresolved instances

Therefore, Friday’s measures will solely profit these instances the place 210 days decision timeline has not been breached.

By Ankur Mishra

The Reserve Bank of India (RBI) on Friday supplied aid to banks from offering a further 20% for unresolved instances beneath its June 7 round. The aid is just for instances through which 210 days decision timeline, after signing inter-creditor settlement (ICA), has not expired as on March 1, 2020. Therefore, Friday’s measures will solely profit these instances the place 210 days decision timeline has not been breached.

However, for a majority of unresolved instances, the timeline of decision had expired in January 2020. So, banks should make extra 20% provisioning within the March quarter for the instances the place 210-day decision interval expired earlier than March 1. According to the June 7, 2019, round of the RBI, banks needed to make extra 20% provisioning for the instances the place decision couldn’t be reached over a interval of 210 days, after signing the inter-creditor settlement.

In respect of accounts the place the overview interval (30 days) was over, however the 180-day decision interval had not expired as on March 1, 2020, the timeline for decision shall get prolonged by 90 days from the date on which the 180-day interval was initially set to run out,” RBI stated in a launch.

After the announcement of June 7 round in 2019, many banks signed inter-creditor agreements (ICA) within the month of June and July 2019. Accordingly, the 210 days timeline for majority of unresolved instances falls earlier than March 1, 2020. “The requirement of making additional provisions shall be triggered as and when the extended resolution period expires,” RBI specified within the round issued on Friday. As per sources, banks are going through provisioning strain of at the very least Rs 25,000-30,000 crore within the March quarter as majority of instances will be unable to avail the aid from RBI. State Bank of India (SBI) alone might have to supply near Rs 10,000 crore for unresolved instances, as per sources.

Indian Banks’ Association (IBA) had earlier approached RBI for the deferral of extra provisioning until June quarter for all of the unresolved instances. FE reported earlier that the regulator had made clear that each one the measures introduced by it have been strictly to supply COVID-19 aid, the supply added. IBA is prone to overview the matter in its assembly on Saturday. “Overall, majority of our requests have been taken care, will reach out to RBI again for remaining interpretation and needs,” a senior banker instructed FE.

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