RBI finds deficiencies in loan restructuring by banks

NEW DELHI: The Reserve Bank has observed certain deficiencies in compliance of its guidelines on restructuring of loans by state-owned banks during annual inspection, the government today said.

Some of the deficiencies observed during the Annual Financial Inspection (AFI) by RBI of the public sector banks include repeated restructuring and non-classification as per record of recovery, Minister of State for Finance Namo Narain Meena said in a written reply in the Rajya Sabha.

Besides, banks do restructuring of loans without proper viability studies, he said.

In another question, Meena said, "higher interest rate is one of the several factors contributing towards non-performing assets (NPAs) of the banks."

As on March 31, 2011, the share of the gross NPAs in total advances of the scheduled commercial banks has declined to 2.3 per cent from 2.5 per cent a year earlier, he said.

In order to adjust the policy rates to levels consistent with the current growth moderation, he said, the RBI in its latest annual monetary policy statement has reduced the repo rate by 0.5 per cent.

The repo rate has accordingly dropped to 8 per cent from April 17.

He also said that the banks are independent to determine their actual lending rate on loans and advances with reference to base rate.