RBI relaxes bad loan provisioning norms for banks

The Reserve Bank of India (RBI) on Monday relaxed provisioning rules against bad loans by allowing banks to set aside up to 50 per cent of floating provisions against the prevailing 33 per cent.

Floating provisions are the amount that banks set aside, above the mandatory provisioning requirement against bad loans established by the central bank.

The relaxation will be applicable for floating provisions held by them as of end-December 2014.

Banks were allowed to utilise up to 33 per cent of counter-cyclical provisioning buffer / floating provisions held by them as of 31  March 2013, for making specific provisions for non-performing assets, as per the policy approved by their boards.

RBI has now decided, as a counter cyclical measure, to allow banks to utilise up to 50 per cent of counter-cyclical provisioning buffer / floating provisions held by them at the end of December 2014, for making specific provisions for non-performing assets, as per the policy approved by their boards, RBI said in a notification.

Banking stocks extended rose 1.8 per cent to hit a session high following the news.

The central bank, meanwhile, said it has almost finalised the structure of Central Fraud Registry and will soon come up with guidelines to enable quick sharing of information about unscrupulous borrowers and help banks fight bad loans.

"We have almost finalised the structure. We would be issuing guidelines soon," a PTI report on Sunday quoted RBI deputy governor S S Mundra as saying.