RBI ambiguity on guidelines puts local bankers in fix, NPAs to rise as second time loan restructuring takes time

PANAJI: A quick solution to the problem of loans given to barge owners and other mining stake holders appears to be unlikely with the latest meeting of the Reserve Bank of India (RBI) officials and local bankers resulting in no clear decision on the issue. 

Banks, in fact are reconciled to showing more bad accounts in their local loan portfolio in 2012-13, as a significant portion of their total  ` 1,030 crore outstanding from the mining sector as is due for repayment within the next three months, and risks getting classified as “non-performing assets.” 
Local banks on Friday, November 16, 2012 were called for a special meeting with RBI officials to discuss the matter of a second time restructuring of loans given to barge owners. However according to several banks managers, present in the talks, the meeting turned out to be a damp squib with the RBI regional director from Mumbai who was supposed to be attending it, failing to turn up.
The meeting was chaired by Mr Jaikish, general manager, RBI- Goa, who advised banks to take a “practical view on the problem” and to handle each account individually on “a case by case basis without flouting guidelines.” At the same time, banks have been also been directed to “avoid being harsh on borrowers and not try to repossess assets as a means of dealing with non repayments.”
A manager of a PSU bank said that although restructuring of loans for those who cannot settle up on time is “a done thing,” there is “no clarity on the subject of second time restructuring of loans.” With no set rules for a future course of action, the manager said that he cannot come to a verdict and is “in a state of uncertainty on the next step.”
The manager added that taking possession of the asset is unattractive prospect as it will only result in additional burden on the bank by way of “rentals and increased costs on account of maintenance.” Other bank managers were of the opinion that a total avoidance of the “barge and mining accounts turning bad” is not possible as several loans of their total portfolio outstanding have to repaid in the next three months and chances are that “the money will not be forthcoming from the borrowers.”  Of the  `1,030 crore outstanding of banks from mining stakeholders, about 10 per cent has already been shown as non performing. The percentage share of NPAs will increase bankers said as “decision on second time restructuring needs to be immediate, at least within 90 days.” 
All the banks, including private sector and local cooperative banks have extended credit to barge owners, truckers and mining equipment operators. Speaking to the Navhind Times, Mr Ulhas Phaldesai, chairman, Goa State Coperative Bank said that they have already communicated to the local RBI office on permission for second time restructuring of loans, and are awaiting a reply. GSCB, has  ` 87 crore of advances to mining stakeholders of which Rs 65 crore are to the truckers. Mr Phaldesai added that “NPA level will increase in the current fiscal.”
Meanwhile banks are expected to meet up with RBI officials again, in a month’s time, to review the situation.