Sunday, April 26, 2009

RBI extends time period for realization of bad assets

On Friday, the Reserve Bank extended the period for final realization of bad assets from the existing five to seven years to decrease the pressure of NPAs rising on companies.

The Bank increased the time limit for reconstruction and securitisation companies (SCs/RCs) for realisation for reconstruction of assets taken by it.

"As an interim measure, the Bank has accorded permission to give an extension of two more years for realisation of the assets in respect of the security receipts (SRs) issued by SCs/RCs which have completed five years," said the Reserve Bank in a notification

The Central bank had received representations from many asset reconstruction and securitisation companies which had not been able to realize the financial asset acquired within the given time frame.


Banks'' non performing assets to triple by 2011: Crisil

The economic slowdown as well as aging of loans will deteriorate the banks’ assets in the next two years, said a report from Crisil, the rating agency. The report also said that the banking sectors’ gross non-performing assets are likely to witness a growth to touch 5 per cent by 2011 as against 2.3 per cent in 2008. The gross NPAs in absolute terms would grew to around three times from the March 2008 level of Rs 55,000 crore to Rs 1.9 lakh crore. This rise in NPA include the demand slowdown as well as lack of funding, lengthy working capital cycles and foreign exchange rate fluctuation, said Mr Tarun Bhatia, Head, Finance Sector Ratings, Crisil.

However, in the retail front, the gross NPAs are likely to reach 4.7 per cent by March 2011 from 3.2 per cent in March 2008. But the impact will be limited as most of the banks as well as financial entities have not increased their incremental exposure to unsecured loans portfolio, the report said. The bottom line of the banking sector will have a negative impact due to increase in defaults cases but with the banks having to keep aside about 25-40 per cent of their profits as provisions for their non-performing assets this fiscal, Mr Bhatia said.