The Reserve Bank of India (RBI) is planning to introduce guidelines on securitisation of stressed assets and conduct a comprehensive review of the prudential framework to support the resolution ecosystem and bolster the banking sector. The proposed securitisation of stressed assets framework is crucial to effectively deal with rising non-performing assets (NPAs). Stressed assets, which include NPAs and special mention accounts (SMA) with incipient stress, have adverse implications for the economy. These assets impede credit creation, tie up capital, impose costs on financial institutions, and may lead to inefficient allocation of resources. According to the RBI’s Annual Report, securitisation of stressed assets can effectively address the issues of timeliness and unlocking fair value. RBI governor Shaktikanta Das has cautioned banks against using innovative methods to conceal the actual status of stressed loans.
Company mentioned in this article: None mentioned
Person mentioned in this article: Shaktikanta Das, Governor of the RBI
