October 20, 2009

If you have taken multiple loans but defaulted in one of those, your entire portfolio will not be described as bad loans as is being done.The banking industry in its customary meeting with the banking regulator ahead of the credit policy review held on October 12 unanimously urged the Reserve Bank of India (RBI) to make changes in the provisioning norms, which will leave more capital in the hands of banks.

“Sometimes an individual takes many loans — say farm loam, housing loan — at the same time. He plans to repay both through different sources of income. But for some reason if a particular source of income dries up, he defaults on one of the loans but continues to repay the other. In such a scenario, considering both the loans as bad loan is bit harsh. Hence, banks have urged RBI to review this norm,” Allen Pereira, chairman and managing director of Bank of Maharashtra, told Financial Chronicle.