Instructions to banks to identify distressed loans

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Before the end of the moratorium, the Reserve Bank of India (RBI) will be on the water

Mumbai, Ta. Monday, June 22, 2020

The Reserve Bank of India (RBI) has instructed banks under its control, especially public sector banks, to conduct detailed stress tests even before the Covid-15 has any serious impact on the country's banking system. This verification will help banks identify the proposed stress on them.

In a letter to various banks last week, the RBI also asked banks to prepare plans to raise money from the market in case they deem it necessary, RBI sources said.

Banks need to have sufficient capital in case of significant erosion in the capital of banks due to the impact of coronavirus. However, in view of the moratorium and the economic downturn, some banks have already started recognizing their distressed loans.

However, as the moratorium expires at the end of August, it has been instructed to identify the stranded loans before September, sources said.

Most of the banks are worried that their financial flow will be disrupted in the post-Covid-12 scenario. The possibility of a massive increase in NPAs is not ruled out.

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