Insolvency exercise for banks

Calcutta: The financial performance of banks with many non-performing assets could improve in the coming quarters due to the recognition of bad assets and substantial provisions against them.

SBI group leader economic adviser Soumya Kanti Ghosh said that banks are expected to see reversals towards the end of the current fiscal year due to the resolution of stressed assets that were referred to the National Company Law Tribunal under the insolvency and bankruptcy code.

"Under the bankruptcy code, the resolution happens even if it is in a slower place, and some data suggest that 32 accounts have been settled from June this year, the liquidation value Rs 21,000 crore, estimated at around Rs 50,000 crore. is close to Rs 90,000 crore and resolutions are about 55 percent of the assigned receivables, "Ghosh said.

"Given the hectic recognition of bad assets by the banks, including the SBI, it is possible that things will improve in the coming quarters, because 55 percent average solution amount is not very bad, figure," said Ghosh.

According to Ghosh, the ongoing NPA crisis is a backward effect of the global crisis, domestic imbalances and strict legal guidelines for the recognition of assets by the RBI.

"The rising NPA increase prevents banks from providing sufficient credit to the ailing parts of the economy and can lead to a slowdown in the money supply and prevent economic growth from realizing its optimum potential," said Ghosh during an event on Friday.

A combination of an assessment of the asset quality of the banks together with the detection of fraud and the revised RBB framework for the resolution of stressed assets in February added up the increase of non-performing assets, which stood at 11.6 from March 2018. percent of total assets. advances from planned commercial banks and are expected to rise to 12.2 percent by March 2019.

Ghosh also said that banks should live with low credit growth in the coming years, adding that banks had 30-35 percent growth before 2008. The bankers expect credit growth of about 10 percent of this budget.

In addition, the regulator has issued a framework for exposure to companies, which will take effect from April next year. Within the framework, the sum of all exposure values ​​of a bank for a single counterparty may at all times not exceed 20 percent of the available capital of the bank. This means that banks should investigate even more credit opportunities in the retail and diversified sectors.

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