RBI may allow lower provision cover ratio during downturn

The Reserve Bank of India is working on a comprehensive policy that will allow banks to bring down the provision coverage ratio during downturn. However, this will have to be done in a phased manner, said Mr Anand Sinha, Executive Director, RBI.  The RBI had asked banks, in October 2009, to maintain a provision coverage ratio of 70 per cent. “We asked banks to maintain a provision coverage ratio of 70 per cent as part of the build-up phase. It has perhaps been causing some kind of discomfort. It is not meant to be kept at that level. There will be a release phase, which we are working on. We will come out with a comprehensive policy under which banks may be allowed to use the provisions made under certain conditions,” said Mr Sinha, while addressing Bancon 2010.