Saturday, May 14, 2011

RBI RELAXES NORMS FOR NPA PROVISIONING

The Reserve Bank of India (RBI) has relaxed norms regarding setting aside money for bad loans- a move which has come as a major relief for all commercial banks. The banking regulator has
said banks should maintain 70% of the provision coverage ratio (PCR) of their gross bad loans as on September 2010, but they do not have to maintain 70% of PCR on an ongoing basis. RBI has said from September, 2010 on wards, on incremental NPAs banks would have to set aside money based on the income recognition norms. This ranges from 10% in the initial months when the asset is classified as substandard to 100% when it is classified as a loss asset after a few years.

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