Speaking of the banking sector... at the end of March 2014, loans over Rs 2.5 trillion were non-performing in the Indian banking system. That's indeed an alarming figure! Hence, to combat the rising bad loan risks in the system, the Reserve Bank of India (RBI) has raised red flags again. And this time it does not intend to leave any stone unturned to fight out this battle. The central bank has urged bankers to enhance transparency and practice prudent lending. To that effect, lenders are directed to disclose sector-wise advances and non-performing loans (NPLs) in the 'Notes to Accounts' section in their financial statements from the financial year 2014-15 onwards. Not just that. The RBI is also keen to take steps for early recognition of NPAs in the system. The banks now need to classify accounts into a special category based on the number of days their interest payments are pending. This category is known as Special Mention Accounts (SMA). Further, the RBI has also instructed banks to disclose credit information of loan accounts above Rs 5 crores. These measures are indeed welcoming. For they will not only help the regulator track the grey areas in the system, but also help shareholders take wise investment decisions!
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