MUMBAI : The restructuring of loans done by banks provides transitory respite but such exercises need to be monitored prudently, a Reserve Bank of India working paper released on Friday said.
“Though restructuring of advances was helpful in containing the effect of rising bad loans in banks’ balance sheet, in the long-run, it could have implications for asset quality of the banks, in case a significant proportion of these restructured advances turn out to be bad loans,” the paper said.
“Hence, there is a need to carefully monitor the impact of restructuring on asset quality of banks in the medium to long run.”
The working paper titled “Re-emerging Stress in the Asset Quality of Indian Banks: Macro-Financial Linkages” is authored by Shashidhar M. Lokare, assistant adviser in the RBI’s monetary policy department. -Cogencis
