Following the tightening of norms on provisioning for restructured loans by Reserve Bank of India (RBI), banks might have to set aside Rs 1,500-2,500 crore as provisions in 2013-14 for their existing recast loan book. Ratings agency Icra said this in a report.
Recently, the central bank said banks have to raise provisioning for the existing stock of restructured assets to 5 per cent in a phased manner over three years from the current 2.7 percent. During 2013-14, banks must raise provisioning on the existing stock of recast loan from 2.75 per cent to 3.5 per cent.
The total provision burden on banks till 2015 is estimated to be Rs 2,500-5,000 crore, the rating agency said.
The RBI also asked banks to raise the provisioning for fresh standard restructured advances from June 1, 2013 to 5 per cent from 2.75 per cent.
Further, the central bank mandated banks to classify all loans recast after April 1, 2015 as non-performing asset (NPA). At present, banks are allowed to recast debt without classifying it as NPA but they have to make higher provisions.
Standard restructured advances attract a provision of 2.75 per cent, as against 0.4 per cent in standard advances.
Some analysts expect banksÂ’ profit before tax to be hit by 1-3 per cent in 2013-14 owing to fresh restructuring, where the provision is increased to 5 per cent.
RBI has also said short-term loans, (except working capital), if rolled over more than twice, would amount to restructuring.
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