Bankers are looking forward to the Reserve Bank of India's (RBI's) new scheme to tackle bad loans. But they are also keeping their fingers crossed owing to its limited applicability, as also the absence of provisions to cut down lengthy legal processes.
Though previous tools to arrest mounting non-performing assets (NPAs) did not provide satisfactory results, bankers have started examining the applicability of the 'Scheme for Sustainable Structuring of Stressed Assets' (S4A) introduced last month by the apex bank. Crisil has estimated weak assets in the Indian banking system to touch a high of Rs 800,000 crore by the end of the current fiscal.
The RBI's latest Financial Stability Report suggested that the GNPA (Gross non-performing asset) ratio might rise to 8.5 per cent by March 2017 from 7.6 per cent in March 2016. The new scheme envisages banks will need to divide the existing debt of a company into "sustainable" and "unsustainable". The sustainable part is that share of the debt that can be serviced by the company on the strength of its current cash flows.
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