RBI set to comb spike in bad loans
Manual intervention in identification of non-performing assets may be leading to NPA overestimation.india Updated: Apr 08, 2013 23:54 IST
The Reserve Bank of India (RBI) is likely to look into the mechanism used by banks to identify non-performing assets, as the overall level of bad loans in the banking industry has steadily risen in the last financial year. The Institute of Chartered Accountants of India (ICAI) in a recent meeting with the central bank brought up the issue of manual intervention in detection of NPAs, which are hurting the financial health of banks.
Even as the finance ministry and RBI have directed banks to migrate to the core banking solution and eliminate manual intervention while detecting NPAs in their books, several banks have been found using manual tools while managing bad assets.
Manual intervention implies recording of crucial data manually, which leaves room for data mismatch. Such mismatch results in an incorrect assessments of the NPA problem, bankers said.
“This issue needs to be addressed at the earliest and ICAI has brought it up with the authorities,” Amarjit Chopra, former president, ICAI told Hindustan Times.
From April 1, the provisioning requirements for restructured loans of banks has been raised to 5% from 2.75% by the RBI after the banking industry witnessed a significant surge in the level of bad debts.
Meanwhile, the government has asked banks to prepare regular reports on their NPA levels.
Further, the issue was also brought up at the recent meeting that finance minister P Chidambaram held with the chairmen of public sector banks.