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Union Bank of India Chief Arun Tiwari on Tuesday said banks, under the aegis of the Indian Banks’ Association, will make a request to the Reserve Bank of India to extend the deadline for withdrawing the special asset classification benefit for all restructured loan accounts by a year.
The central bank last year said the special asset classification benefit will be withdrawn for all loan restructuring cases with effect from April 1, 2015.
Currently, the provision requirement on restructured loan accounts is 5 per cent.
Downgrade of accountsBut come April 1, 2015, when the restructured loan accounts will get downgraded (to the non-performing asset or NPA category), the provisioning will go up to 15 per cent.
The increased provisioning will weigh on banks’ profitability from the first quarter (April-June) of FY 2016 onwards. In the reporting quarter, out of Union Bank’s total restructured loan accounts of ₹12,000 crore, loan exposure aggregating ₹240 crore turned sour.
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