Eleven state-owned banks will have to wait for about a month before knowing which of them will have lending curbs eased after a Reserve Bank of India (RBI) panel reviews their December quarter results, an official with direct knowledge of the matter told Reuters on Thursday.
The RBI’s Board for Financial Supervision (BFS), chaired by the central bank’s new Governor Shaktikanta Das, met on Thursday and looked at estimates for the financial performance of the banks in the October-December quarter.
Based on those estimates, about three to four of these banks - which in recent years were targeted by the RBI for tough lending restrictions because of a surge in bad loans, capital depletion and mounting losses - are likely to have those curbs eased, the official said.
However, the panel will wait to examine audited results of the banks, before making a final decision, the source said. The results are due by the end of the month but it is unclear when the next panel meeting will be.
The government has infused capital in some of the banks to help them to adhere to the central bank’s capital ratios.
However, the panel would like to be sure which of the banks will be able to maintain minimum capital ratios under scenarios such as a delay in the recovery of bad loans in bankruptcy cases, the official said.
“Every bank has given an estimate of their recovery plan to the RBI. We need to be sure that banks are following that plan and should be compliant with the PCA (Prompt Corrective Action) norms by March end on capital and bad loan parameters.”
There are 21 listed state-run banks in India that provide about two-third of the total loans in the economy. With nearly half of them under a PCA plan and the rest cautious due to a record $150 billion in bad debt, the government is keen the curbs be relaxed to boost their ability to lend.