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RBI may take action against misreporting NPAs

The Reserve Bank of India proposes to take action against banks, which give incorrect information about non-performing assets. The RBI suspects that in certain cases banks continue to treat certain assets that have become NPAs as standard assets. Raghuram Rajan, governor, said RBI inspects the banks and ferret out situations where something that is standard is not NPA and these are called divergences. And some banks there are more divergences than the other and such banks have to satisfy the RBI, he said, adding, RBI is now turning towards taking actions against such divergences. In terms of RBI norms, a bank has to classify the loan as NPA if the interest and/or principal are due for more than 90 days. The sub-standard assets, which are the first level of NPAs attract 15% provisioning compared with 0.4% for standard assets. A case of misreporting of NPA came to light recently when Bank of India wrote to RBI complaining about its auditors stating that they have not allowed the loan to Essar Steel to be treated as standard asset even though other lenders had done so. It is believed that the borrowers had paid the dues on the 92-93rd days and as a result most banks had not classified them as NPA.

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