Banking Sector: India relaxes provisioning norms

Banks have to maintain funds ranging from 10 per cent for sub-standard assets to 100 per cent under ‘loss category’.

The Reserve Bank of India (RBI) relaxed the provisioning norms for banks with retrospective effect from September 30, 2010, which in turn could help banks post higher profits.

RBI said banks will have to maintain a provision coverage ratio of 70 per cent of their gross bad loans only till September 30, 2010 after which they will have to follow just the standard capital provisioning requirement as per the Basu committee.

Under the present provisioning norms, banks have to maintain funds ranging from 10 per cent for sub-standard assets to 100 per cent for assets under the ‘loss category’.



Published in The Express Tribune, April 24^th, 2011.