Banks may require 20% incremental provisioning for stressed accounts

Banks may have to arrange for an incremental provisioning of 20% against 50 large stressed accounts in order to absorb any losses, states a joint report by ASSOCHAM and rating agency CRISIL. 
 
These 50 large stressed accounts belong to sectors like construction, power and metals, among others, and constitute about half of the gross non-performing assets of the banking sector.

According to the report, the Insolvency and Bankruptcy Code (IBC) is required to address various hurdles such as inter-credit conflicts, the ability of large corporates to delay the recovery process and the burden on the National Company Law Tribunal (NCLT)/Debt Recovery Tribunal (DRT).
 
The report adds that the success of the code hinges on strengthening its ecosystem, which will help in protecting the interest of the stakeholders, instill financial discipline among borrowers and create a robust platform to attract investors.

The IBC will benefit corporates, professionals and employees while increasing the confidence of the investors and facilitating the deepening of the domestic-corporate bond market.