RBI Group wants stricter norms for loan recast

Loan restructuring by banks could get tougher and misuse of the debt recast facility by corporates may subside if the Reserve Bank of India accepts the recommendations of a working group on review of prudential norms for restructuring. The working group on restructuring of loans has suggested the RBI should do away with regulatory forbearance regarding asset classification, provisioning and capital adequacy on restructuring of loans and advances, in line with the norms followed internationally. This would mean banks will have to classify an asset as substandard and make provisions on it the moment it is restructured. The group, headed by RBI executive director B Mahapatra said, treating a restructured debt as standard - known as regulatory forbearance - could be implemented after a period of two years depending on the macroeconomic situation.