INSUBCONTINENT EXCLUSIVE:
weighed down the balance sheets of banks necessitating large provisioning, which adversely affected their profitability, especially of
state-run banks during 2018, the Reserve Bank of India (RBI) said on Friday.In its "Trends and Progress of Banking in 2017-18" report, the
RBI also said that it is addressing the concerns of non-banking finance companies (NBFCs) over acute liquidity crunch following the series
down the consolidated balance sheet of the banking sector, necessitating large provisions, which adversely affected their profitability
stabilise, "albeit at an elevated level; capital positions have been buffered and the provision coverage ratio has improved"."The recent
concerns about some NBFCs are being proactively addressed
The consolidated balance sheet of NBFCs expanded in 2017-18 and during the first-half of 2018-19," the RBI said."The balance sheets of
NBFCs, especially that of companies that provide loan finance, have been growing manifold against the backdrop of relative decline in their
cost of lending vis-a-vis banks and subdued credit growth of scheduled commercial banks in the previous three years."The central bank said
this year can be considered a watershed in terms of setting up of a "new, comprehensive, decisive and credible" NPAs' resolution framework
in February under the mandate of the Insolvency and Bankruptcy Code (IBC).The new framework requires banks to report a default even if the
repayment is due for more than a day
Thereafter, they are expected to introduce a resolution plan to ensure that the borrower repays the dues on time
In case the banks are unable to implement the resolution plan within the time limit of 180 days, they have to compulsorily admit the account
into the bankruptcy process under the IBC.According to the report, of the 21 public sector banks (PSBs), the 11 that are under the RBI's
Prompt Corrective Action (PCA) framework have shown lower growth in gross non-performing assets (GNPAs) as compared to non-PCA banks."The
United Bank, Corporation Bank, IDBI Bank, Uco Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce,
Dena Bank and Bank of Maharashtra.The banks under PCA, which imposes lending restrictions, have also increased recoveries, contained their
growth in advances and deposits, reduced riskiness of assets and focused on better rated assets, the RBI said."The sharper increase in NPA
ratios compared to non-PCA PSBs is also because of decline in advances by the former
