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Hike in standard asset provisioning to impact PSU banks` profit by 5-10%: Edelweiss

The Reserve Bank Of India (RBI) on Friday released a working group report to review restructuring guidelines. The paper advocates stricter/tighter regime of restructuring compared to the current norms, which it  believes are fret with moral hazard issues (absence of adequate due diligence by lenders coupled with encouragement to lax business practices by borrowers).

Norms related to removal of regulatory forbearance, extension of the timeframe for upgrade to standard restructured, restricting the usage of conversion of debt into pref/equity and ensure promoter`s ``skin in the game`` (raising contribution of promoters in the sacrifice), ensuring mandatory personal guarantees will make restructuring more difficult, but genuine. 

``Hike in standard asset provisioning requirement to impact earnings (PBT) of PSU banks 5% to 10%. Hit to be highest for banks like Indian Overseas Bank, Oriental Bank of Commerce, Union Bank of India, and Punjab National Bank. Hit to be minimal for private banks at less than 1%,`` said Edelweiss Securities.