RBI clears fog on special provisioning

RBI clears fog on special provisioning

The Reserve Bank of India (RBI) has cleared the fog on ‘special provisioning’ of loans which are under moratorium — a clarification that has come as a relief to many banks.

In a recent conversation with bank CEOs, senior regulatory officials have spelt out that provisioning should be considered only for loans where principal or interest payments are overdue between 61 and 90 days as on March 1, 2020. Such loans are categorised as SMA2 — or, special mention accounts (SMA) -2.

“Several banks were under the impression that all SMA accounts as on 1st March would have to be provided for. This would have significantly consumed banks’ capital and lowered their ability to give fresh loans,” a senior banker told ET.