Indian banks to cover bad loans |
The Reserve Bank of India (RBI) has allowed banks to divert a greater share of a mandatory contingency fund to provide for bad loans, a move that will improve lenders` profitability and bolster their balance sheets. Under the new rules, banks can use half or 50% of their so-called counter-cyclical buffer — a mandatory safety fund that banks have to set aside to deal with extraordinary economic shocks — to provide for non-performing assets (NPAs), up from 33% allowed earlier. NPAs are loans that do not yield returns.
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