....Given this, RBI has done the right thing by telling banks to put in place a mechanism to evaluate the risks from unhedged positions and to report this regularly to RBI, apart from pricing this in while extending credit to them. In the case of restructured loans, RBI has advanced some of the recommendations of the Mahapatra committee that was to review this. While the draft guidelines will be issued by the end of January 2013, RBI has said that provisioning on restructured standard accounts is to be hiked from 2% right now to 2.75%. While that’s a good step, it may not be enough—indeed, the RBI working group had suggested a figure of 5%. More important, if regulatory forbearance is being abused—based on Chakrabarty’s data—RBI needs to come out with some norms, including personal guarantees of promoters. Hopefully, we’ll see this in the January guidelines.......
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