Profit Surge Ahead: Banks Set to Gain ₹20,000 Crore from New RBI Rule

A recent regulatory change by the Reserve Bank of India (RBI) is set to significantly enhance bank profits by up to ₹20,000 crore in the March quarter. The new rule allows lenders to immediately book profits on loans sold to asset reconstruction companies (ARCs) if the sale price exceeds the net book value. This applies to deals involving cash payments and government-backed security receipts (SRs). Previously, banks had to wait for actual recoveries before recognizing profits, a process that often took years. The change is particularly beneficial for transactions involving the National Asset Reconstruction Company (NARCL), where government guarantees ensure a high likelihood of recovery. This move is expected to improve liquidity and profitability for banks, especially those with significant exposure to non-performing assets.

 

Source: Economic Times