The Reserve Bank of India (RBI) on Wednesday provided big relief to banks that fear increased provisioning for non-performing assets (NPA) amidst the pandemic would seriously dent their capital.
In order to mitigate the pandemic-related stress on banks and as a measure to enable capital conservation, the RBI has now allowed banks to utilize 100 percent of floating provisions or countercyclical provisioning buffer held by them as of December 31, 2020, for making specific provisions for non-performing assets.
What this would mean is that banks may not have to dip into their capital for fresh provisioning on new NPAs but could provide cover for such bad assets through floating provisions already existing in the system.
To see that the measure is used only selectively, such action by banks will only be allowed with prior approval of their Boards. Also, such utilisation will be permitted with immediate effect and up to March 31, 2022.
Via TechGenyz https://www.techgenyz.com
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