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| Infra Finance Cos told to make standard assets provision Wed, 25 May 2011 22:30:30 GMT |
| MUMBAI The Reserve Bank of India has advised state-run infrastructure finance companies to make provisions for standard assets from March 2012 due to fears of increase in defaults amid uncertainty over pending infrastructure and power projects , two people from the power ministry familiar with the matter told ET. RBI's current guidelines exempt public sector financial companies from making provisions for standard assets. The rule is applicable till March 2012. Rural Electric Corporation, Power Finance Corporation and India Infrastructure Finance Company are some of the companies who come under this exemption. For banks and non-banking finance companies, standard asset provisioning is currently at 0.25% of the total credit. Standard assets are loans that do not have any problem about repayment and are less risky. The central bank also wants infrastructure finance companies to give a future roadmap once the new norm on standard assets provisioning is introduced. "We are preparing a roadmap on our future provisioning norms," said REC chief financial officer HD Khunteta. RBI is on a drive to tighten norms for non-banking finance companies and wants to regulate them at par with banks. Bad loans of Indian banks have risen in the past one year. The government has also sounded a word of caution on the rising bad loans of public sector banks. Gross non-performing assets of the largest lender, SBI , rose to 3.8% at the end of 2010-11 from 1.72% a year ago. In the last three months, the central bank has introduced stringent prudential norms for NBFCs, including standard asset provisioning, removal of priority sector status and increase in capital adequacy ratio. A committee under RBI deputy governor Usha Thorat is looking at separate regulations for NBFC to provide protection in the times of economic crisis. |
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