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  Are Banks exploiting SC order to not to declare NPAs to their advantage? In compliance with the Supreme Court’s (SC) interim order that the accounts, which were not declared NPA till August 31 shall not be declared NPA till further orders, the banks have not shown the fresh GNPAs in their unaudited financial results for Q3FY21. Even the accounts, which would have become NPAs during the third quarter in the normal course, are excluded due to the interim order. Of course, the banks have mentioned in their notes to accounts, attached to their financial results in their filings with stock exchanges, as to what would have been the effect on GNPA and NNPA ratio, had the interim order was not in place. However here also they did not indicate, what would be the impact on PCR had the SC’s order was not there. While the financial results given in figures, as per SEBI format and the presentation slides capture the attention of the public, more particularly the investors, the same cannot...

  FREEZE ON NPA IN Q3FY21  From the financial results published by the banks for the quarter ended 31st December 2021, one is unable to arrive at actual GNPA and NNPA position of the banks. While financial results indicate a certain ratio, notes to accounts indicate that the ‘proforma’ NPA is something more added to what is shown under financial figures reported in the format. The confusion is on account of Supreme Court ruling that no account which is shown as standard in the books of a bank as on 31st August 2020 shall be shown as NPA till further orders from the court. To implement the court order and at the same time keep transparency to enable the reader to have a fair view of the financial results of a bank, I wrote to RBI as under: “In line with the Supreme Court’s (SC) interim order “the accounts which were not declared NPA till August 31 shall not be declared NPA till further orders”, the banks have not shown fresh GNPAs in their unaudited financial results for Q3FY21...

BANKING: HOT TOPICS 2021     1. ASSET QUALITY:   As per Financial Stabilty Report,  Jan 2021 (FSR) released by RBI, the GNPA ratio, which dropped down to 7.5% in Sep 2020  (from 8.2% in Mar 2020) is likely to reach 13.5% in Sep 21 under the baseline scenario and may escalate to 14.8% under a severe stress scenario. This is worrisome since the government and RBI initiated various measures (given below) to address the financial difficulties, arising out of COVID 19, faced by both individual and non-individual borrowers.  Additional Funding: Emergency Credit Line Guarantee Scheme (ECLGS) was extended in May 2020 to all MSMEs having credit outstanding of upto Rs.50 cr. and business turnover up to Rs.250 cr., as part of atmanirbhar package announced by the Central Government. Eligibility for availing the facility was that the accounts of the borrower shall be standard assets and the past due of the accounts shall be less than or equal to 60 days (SMA 0 and SMA 1...

FARMERS' PROTESTS: RESOLUTION IS POSSIBLE   It is nearly six weeks since the farmers, mainly from Punjab, landed in Delhi to protest against the three farm laws passed in the last session of Parliament. Unless a miracle happens either  by way of directions by the Supreme Court and is faithully listened to by both the parties as 'meaningful' or both the parties reach midway in their next round of discussions, the agitation is likely to extend up to Republic day and beyond.  I look at the ground realities, the stand taken by both the sides and what can bring the issue closer to a resolution. I. Ground Realities 1.Union Territory of Delhi is ruled by a party different from the party ruling the centre. The party ruling Delhi UT, is not part of allies to the party ruling the centre. Incidentally it is the third largest party in Punjab, with a vote share of twenty per cent plus. Not surprisingly, it extended open support to the ongoing agitation in Delhi. 2. Green Revolution le...