RBI's new rules on NPAs to weigh on bank stocks; PSBs to face bigger impact
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RBI's new rules on NPAs to weigh on bank stocks; PSBs to face bigger impact

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The new non-performing asset (NPA) resolution framework announced by the Reserve Bank of India (RBI) on Monday is expected to weigh on stocks of banking companies in Wednesday’s trade. Shares of public sector banks (PSBs) and private sector lenders such as Axis Bank and ICICI Bank are likely to feel the heat in Wednesday’s trade, analysts say. Experts, however, say that the PSBs will face a bigger impact as they have a large number of loans in various stressed brackets such as S4A, SDR, 5:25, and others, which are currently not classified as NPAs.

ALSO READ: RBI's move to bar all debt-recast programmes will delay recovery: India Inc In the new framework, such loans will need to be recognised as NPAs or have to be reported under the IBC (Insolvency and Bankruptcy Code), 2016, if the resolution is not completed within given timeframe. “In case of the PSBs, the quantum of bad loans outside GNPA (gross NPA) is around 30-50 per cent of current GNPAs, which could potentially now be required to be treated as NPA or will go to the NCLT (National Company Law Tribunal), for resolution,” says Aalok Shah, an analyst at Centrum Securities.

A note by ICRA said the revised framework is likely to increase the reported NPAs of the banks in coming quarters. “This is likely to be an outcome of implementation of resolution plan for large borrowers that are currently in the Special Mention Accou...

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