A Reserve Bank of India (RBI)-appointed panel has rightly recommended that all bank loans being subject to ‘restructuring’ be classified as non-performing assets (NPA). Currently, such loans are treated as ‘standard’, even when the terms of their restructuring involve banks taking a hit, whether through reduction in interest rates, elongation of repayment period, part waiver of principal or interest, and so on. Whichever way one sees it, restructuring entails borrowers being granted concessions that the banks would not otherwise even consider. Moreover, not treating these loans for what they are — in practical terms, their performance is nothing but ‘sub-standard’ — makes no sense when the amounts involved are not small either. Between March 2009 and March 2011, the gross NPAs of Indian banks rose from around Rs 68,000 crore to Rs 94,000 crore. But restructured advances, technically regarded as ‘standard’, soared even more from just over Rs 60,000 crore...
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