The Hindu : Banks allowed to sell NPAs to securitisation cos. at discount

Online edition of India's National Newspaper
Friday, May 09, 2003

Business

Business

Banks allowed to sell NPAs to securitisation cos. at discount

MUMBAI MAY 8 . The Reserve Bank of India has clarified that if the sale of assets to securitisation and reconstruction companies is at a price below the net book value, the shortfall in valuation should be debited to the profit and loss account of the year.

In a circular, the RBI emphasised that banks would be able to sell their non-performing assets (NPAs) to securitisation and reconstruction companies at considerable discount.

With a view to enabling banks to meet the resultant shortfall, if any, banks are advised to build up provisions significantly above the minimum regulatory requirements of their NPAs, particularly for those assets that they proposed to sell to the securitisation and reconstruction companies. Meanwhile, the RBI also clarified that the investment fluctuation reserve (IFR) would be part of Tier-II capital of the banks that would be considered up to a maximum of 100 per cent of total Tier-I capital for the purpose of compliance with the capital adequacy norms.

— UNI

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