CHENNAI: As the commercial vehicle sector continues to battle the slowdown, financiers are facing a grim future. This is because of the Reserve Bank of India (RBI) draft guidelines that require NBFCs to move to the asset classification and provisioning norms as applicable to banks, in a phased manner, commencing FY15. In the first phase starting April 2014, the norms require provisioning of loans that are over 120 days due from the current 180 days. Into 2015, this has to be brought down further to 90 days.
While some NBFCs like Sundaram Finance moved to the 120-day norm in FY13 itself, some others are in the process of updating to the new system. "We have already moved to recognising NPAs (non-performing assets) at 120 days and have also increased the standard asset provisioning norm to 0.3% against the statutory need of 0.25%," V Lakshmi Narasimhan, chief financial officer of Kolkata-based Magma Fincorp, said.
Some others are settling into the new provisioning norm in a staggered manner. "As a company, we are okay with the idea of 90-day provisioning. As a first step towards achieving the new norms, we have reduced our provisioning from 180 days to 150 and gradually will bring it down to meet regulatory requirements," Ramesh Iyer, managing director, Mahindra & Mahindra Financial Services, said.
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