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The Board will also discuss steps to be taken to ease the flow of credit to non-core finance companies (NBFC) following the crisis in Infrastructure Leasing and Financial Services (IL & FS). The Finance Ministry will probably argue for a loosening of the central bank's discomfort in favor of easing the central bank (19459009) (prompt remedies). PCA) of the Reserve Bank of India (RBI) as early as Tuesday, when the regulatory council will meet in Mumbai, sources told FE. The board will also discuss measures to ease the flow of credit to non-bank finance companies (NBFCs) following the crisis at Infrastructure Leasing and Financial Services (IL & FS). Although the ministry's decision is likely to follow the demands of several distressed public sector banks (PSB), the central bank has been reluctant to soften the "strict" standards of the CPA.
"In addition to allowing them flexibility for growth, flexibility under the PCA, stressed PSBs will also be able to lend more and support efforts to alleviate the NBFC's liquidity problem," he said. An official source, Financial Services Secretary Rajiv Kumar and Economic Secretary Subhash Chandra Garg, who sit on the RBI's board of directors, will present their views.
Last week, the RBI also released its dissent note on some recommendations government group led by the secretary for economic affairs, opposing the idea of setting up an independent regulator outside the central bank responsible for issues related to payments. The latest PCA initiative could sow discord between the ministry and the banking regulator.
Arguing against t out easing, the RBI's governor, Viral Acharya, said last week that without the imposition of the PCA, some banks would have suffered even greater losses and would have required even more taxpayer money for the recapitalization . "The imposition of the PCA can therefore be seen as a first solution, stabilizing the banks at risk and then initiating the deeper banking reforms necessary for the long-term viability of the banks' business model," he said. he declares.
11 of the 21 public sector banks (PSB) are on the RBI watch list in case of financial difficulties, two of them – Dena Bank and Allahabad Bank – are even subject to restrictions on of loan. These stressed banks account for 30% of deposits and 29% of advances from all 21 PSBs.
Under CPA guidelines, banks were forced to face restrictions on dividend distribution and profit transfer. In addition, lenders are not allowed to expand their branch networks and must maintain higher provisions. Executive compensation and directors' fees are also capped. In some cases, they are prevented from lending until they settle their finances.
At last month's annual meeting to review the performance of public service organizations, chaired by Finance Minister Arun Jaitley, key bankers called for a relaxed PCA framework for the restrictions. imposed under this Act affected their lending capacity. Among other things, the PSBs had sought to obtain flexibility in the provisioning standards, threshold 1, the loan start-up mode and the weighting of the badigned risks, so as to leave them room for growth.
The banks under the CPA are as follows: IDBI Bank, Bank of India, UCO Bank, Central Bank of India, Overseas Indian Bank (IOB), Bank Eastern Trade, Bank Dena, Bank of Maharashtra, United Bank of India (UBI), Bank of Society and Bank Allahabad.
Regarding the lack of liquidity for the NBFCs, the RBI raised the ceiling of loans to a single NBFC until the end of December, which should facilitate the granting of additional loans of 59 000 crore to NBFC.
Use state securities as high-grade liquid badet equivalents of Level 1 additional loans granted by the bank to NBFCs and housing finance companies after October 19. This amount will be limited to 0.5% of the bank's current liabilities and net demand. However, concerns about the lack of liquidity persist.
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