RBI raises provisioning on telecom loans

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In an unusual directive, the Reserve Bank of India (RBI) on Tuesday asked banks to provide higher provisioning for good loans, given to stressed sectors, starting immediately with loans given to the telecom sector.

At present, the RBI mandates banks to provide 0.4 per cent as provision for a good loan as ‘regulatory minimum’, indicating the provisions could be higher.

The RBI’s singling out of the telecom sector is particularly interesting. In its various publications, most notably in the Financial Stability Report (FSR), the RBI has said five sectors - infrastructure, steel, textiles, power and telecom - have contributed to more than 60 per cent of bank stress. Steel, power, transport and other infrastructure sectors have created a huge problem of non-performing assets (NPA) to banks.
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