RBI New NPA Rules will impact the banking stocks with high corporate lending exposure. The new rules are also called New Bad Loan Resolution Framework.
The current NPA's of bank stands at Rs 10 trillion. The new NPA rules by RBI will clearly define how the bank will recognize bad loans.
RBI has also disbanded all the existing schemes like S4A, Strategic Debt Restructuring (SDR) & Corporate Debt Restructuring (CDR). Under new rules for NPA, banks have to term the loan as a bad loan before restructuring. It will impact the profitability of the bank because the bank has to make an additional provision of 15% in their balance sheet.
At the same time, banks have to report to a centralized database of RBI on default after 30 days as a special mention accounts.
The entire NPA process will be time-bound i.e. banks will have 180 days to identify, recognize, take action and refer it to IBC if the bank fails to recover the dues.
The impact on the stocks will be negative as it will inflate the NPA's in the bank's balance sheet. In other words, now more accounts will appear as NPA's or bad loans. In short term, there will be paid but in long run, it will help to fix the problem.
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RBI New NPA Rules - How it will impact Banking Stocks (HINDI) trading screen | |
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