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Banks may require 20% incremental provisioning against major NPAs

Banks may require an incremental provisioning of 20% against 50 large stressed accounts in order to absorb any losses, according to a report by Assocham and rating agency Crisil.

These 50 large stressed accounts belong to sectors like construction, power and metals, among others and constitute about half of the gross non-performing assets of the banking sector.

According to the report, Insolvency and Bankruptcy Code (IBC) needs to address various hurdles such as inter-credit conflicts, ability of large corporates to delay the recovery process and burden on the National Company Law Tribunal (NCLT)/ Debt Recovery Tribunal (DRT).

The report added, the success of the code hinges on strengthening its ecosystem, which will help in protecting the interest of stakeholders, instilling financial discipline among borrowers and create a robust platform to attract investors.

The IBC will benefit corporates, professionals and employees and increase the confidence of the investors while also facilitating deepening of the domestic corporate bond market.

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