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Thursday , 20 June 2019
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RBI to relax loans for highly indebted firms – Banks request

Effective April 1,2017 banks have to set aside higher provisions for loans given to highly indebted companies, the system-wide limit for which is set at Rs 25,000 crore (Rs 250 billion) for the financial year 2017-18.

As per the projected levels, the limit of indebtedness comes down to Rs 15,000 crore (Rs 150 billion) from 2018-19. It is further expected to be around Rs 10,000 crore (Rs 100 billion) from April 2019 onwards.

Beyond these limits, the RBI wants banks to invest in debt instruments issued by the companies, rather than giving them loans directly. Banks are said to be not comfortable with the above mentioned norms and is expecting RBI to relax it especially for the highly indebted firms.

It is interesting to note that under the International Financial Reporting Standards (IFRS) norms, banks won’t get any relief on any kind of exposure to indebted companies, be it loans or investing in their bonds. 

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