Banking Business Review
Commercial Banking
Anonymous User | Login

RBI Asks Indian Banks To Make Higher Provisions On Bad Debts

Published: 28-Oct-2009

The central bank also directs banks to keep aside more money when they offer credit to the commercial real estate sector

In the wake of the Reserve Bank of India (RBI) directing Indian banks to raise the minimum provision ratio for bad debts to 70% from 10% by September 2010 in its credit policy review, Indian banks may see their profits being marginally hit in the near future – reported Reuters. The central bank has also directed banks to keep aside more money when they offer credit to the commercial real estate sector.

RBI said the hike was mainly due to a raise in the flow of credit to the commercial real estate sector and the extent of restructuring of loans. It has added that the move was aimed at improving the provisioning cover and propping up the financial health of individual banks.

Reportedly, public sector lenders like State Bank of India and ICICI Bank are expected to be among the most impacted. In a research note, analysts at Citigroup have estimated that SBI's pre-provision profits in the year to March 2010 could be hurt by nearly 20% and ICICI's by 7.4%. However, private sector banks such as Axis Bank and HDFC Bank, which have already high provision coverage, are not expected to be hurt.

According to The Economic Times, Chanda Kochhar, CEO of ICICI Bank, said: “There is no issue of asset bubble as such. The provisioning of loans extended to commercial real estate was high previously. Subsequently, the credit flow to this sector fell, which impacted its activity. Now that the activity has picked up in this sector, RBI has raised provisioning requirement back to the old levels. But banks’ exposure towards commercial real estate sector is low. NBFCs and mutual funds are more active in this space.”

Mail sent successfully

Tell your friend about this article


Please enter a valid email address

Please enter your name

Please enter the mail body


Your Name: *
Your Email: *
Friend's Email: *
Email Body: *
 

Suppliers To This Sector

Browse A-Z

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Icon

Process Integrated Document Generation and Output Management ...

Turku

A Superb Location for Doing Business in Northern Europe ...

White Papers

Browse A-Z

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Use of Voice Biometrics in Smart Card Applications

Many organisations have implemented or are looking into smart card solutions. The objectiv ...

Tower Group Report: Global Exchange Consolidation

This 12-page TowerGroup report analyses the rapidly consolidating exchange market, examine ...

The Value of a Comprehensive Integration Solution

Many enterprises are currently spending more on integration-related projects than they nee ...

The Next Big Thing

Before the credit crisis, lenders started to look more strategically at outsourcing as a v ...

The Business Case for Automating Document Driven Business Processes

This white paper provides a compelling case for taking an enterprise approach to automatin ...

The Benefits Of Automation For The Front Office

The increase in ultra high net worth families around the world — especially in the emergin ...

Related Companies

Punjab National Bank

Punjab National Bank (PNB) is the third largest PSU bank of India. It is engaged in the ...

HSBC Holdings plc

HSBC Holdings plc (HSBC) is one of the largest banking and financial services companies ...

Credit Suisse Group AG

Credit Suisse Group AG (Credit Suisse) is one of the leading global financial services ...

Canara Bank

Canara Bank (Canara Bank) is a premier commercial bank in India, which is engaged in co ...

ICICI Bank Limited

ICICI Bank Limited (ICICI Bank) is an India-based banking company. ICICI Bank provides ...

Suppliers Product News

No items to display

Free Newsletter Sign-up

Sign up, and we will send you a free Hang Seng Bank Limited - Financial and Strategic Analysis Review from GlobalData worth $750

Please enter a valid email address