Ministry, RBI differ on NPA classification

The Finance Ministry has taken the view that advances to infrastructure projects that face completion delay exceeding a year need not be classified as non-performing assets (NPAs) by banks so long as the interest component on the loan was being serviced. This stance is, however, in contrast to the Reserve Bank of India (RBI) guidelines that require advances to infrastructure projects delayed by more than a year to be classified as NPAs even if interest was being paid on time. Official sources said this issue had come up for discussion at the meeting that the Finance Minister, Mr P. Chidambaram, had with chief executives of public sector banks (PSBs) on Friday. Indications are that the RBI may again be requested to review the guidelines. “Our view on this is that the account cannot be classified as NPA in situations of delay over one year if the interest is serviced,” a senior Finance Ministry official said.