"Starting March 2017, banks will need to report differences, if they exist, if (a) additional provisioning assessment exceeds 15 per cent of reported net income, or (b) additional incremental NPL (non-performing loans) identified exceeds 15 per cent of reported NPL increase for the reference period," American investment banker Jefferies said in a research note.
"It's a good start, but unfortunately, banks will currently only report the AQR (asset quality review) differences of FY16, which is not convincing enough that banks will come clean," it said.
The non-performing assets (NPAs), or bad loans, of state-run banks at the end of last September rose to Rs 6.3 lakh crore (almost $100 billion), as compared to Rs 5.5 lakh crore at the end of June 2016.
"Banks are to take in higher standard asset provisions, and build higher provisions on telecom sector owing to current distressed financials," Jefferies said regarding a related RBI notification.
"In our opinion, this rule is perhaps an early experiment starting with the telecom sector, as banks move towards Ind-AS implementation wherein they need to work with 'Excepted Loss' behavior instead of 'Realized Loss," it said.
Ind-AS are the accounting standards applicable for companies in India.
The RBI on Tuesday cautioned banks about loans given to companies in sectors in difficulty such as telecom that may witness rising bad loans.
Banks were asked to put in place a board-approved policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors.
"The telecom sector is reporting stressed financial conditions, and presently interest coverage ratio for the sector is less than one," an RBI notification said.
"Board of directors of the banks may review the telecom sector latest by June 30, 2017, and consider making provisions for standard assets in this sector at higher rates so that necessary resilience is built in the balance sheets should the stress reflect on the quality of exposure to the sector at a future date," it said.
"Besides, banks should also subject the exposure to the sector to closer monitoring," it added.
(This story has not been edited by Social News XYZ staff and is auto-generated from a syndicated feed.)
About VDC
Doraiah Chowdary Vundavally is a Software engineer at VTech . He is the news editor of SocialNews.XYZ and Freelance writer-contributes Telugu and English Columns on Films, Politics, and Gossips. He is the primary contributor for South Cinema Section of SocialNews.XYZ. His mission is to help to develop SocialNews.XYZ into a News website that has no bias or judgement towards any.