RBI hints at stricter prudential norms

RBI hints at stricter prudential norms

NEW DELHI, JAN 16: The Reserve Bank of India (RBI) has exhorted banks to prepare themselves for more stringent prudential norms in the next few years, in line with the international standards.

RBI had raised the ratio to 9 per cent in 1999-2000, based on the recommendations of the committee on banking sector reforms. All public sector banks, except one, had maintained the required level of CAR, he said.

Stating that risk weightage pattern had to be realigned to fall in line with Basle accord, he said the risk weightage should be less.

It was, therefore, necessary to further tighten prudential norms by increasing the provisioning requirements on standard and sub-standard advances, reverse the time-frame for migration to doubtful losses to 12 months and further reduce the exposure limit, he added.

Talwar also said seven more debt recovery tribunals (DRTs) and five appellate tribunals would be set up soon. Interviews for the appointments of judges are due to be completed by the month-end, he added, even as he advised bankers to be patient in the debt recovery process. He said such measures took time, but were gradually being put in place. He also pointed out that bulk of the NPAs came, not from the priority sector (46 per cent), but, from the corporate sector (48 per cent).

He said market discipline was a must for the banks. The proposed introduction of bankruptcy and foreclosure laws and setting up of credit information bureaux would help in dealing with the impaired assets.

While pursuing compromise settlements arrived at lok adalats more effectively, banks had also been advised to constitute settlement advisory committees for compromise settlements of chronic cases of NPAs in the small scale sector, he added.

Panel to look into I-T sops for VRS payouts

New Delhi: The Reserve Bank of India has set up a committee to examine the demand from public sector banks on tax concessions for the voluntary retirement schemes payout. The panel will also look into the plea for amortisation of the amount over five years.

The committee includes representatives from the Institute of Chartered Accountants, and its recommendations will have to be vetted by the Central Board of Direct Taxes before any deviation can be granted.

Chairman of the Indian Banks Association SS Kohli said on the sidelines of Becon 2000 here on Tuesday that the banks are in danger of incurring major losses, in case the present income-tax rules are applied in the case of VRS.

Since the banks are not paying one-shot moneys, they have urged the RBI to exempt these amounts from being treated as part of the tier-I capital of the banks. Moreover, as the payouts are being spread out over five years, the banks should be allowed to amortise the funds.

Other bankers present on the occasion also endorsed the general assertion that with more stringent provisioning norms, banks were already under great pressure, and any difficulties in income-tax from VRS could worsen the state of affairs.