Beijing, July 7 (IANS) China is imposing checks on large banking withdrawals following fears of bank runs and rising bad debts among the lenders.
As per media reports, limits on businesses and individuals withdrawing large amounts of cash, without prior approval, will first be launched as a pilot project in Hebei province, and then extended to other regions, according to the People's Bank of China.
The new restrictions require lenders to report withdrawals of upwards of 100,000-300,000 yuan for individuals, and 500,000 yuan for businesses.
There has been mounting fear of bank runs and only last month action had to be taken to avert two bank runs. Last year, the government had seized several banks.
There are reports that many local banks have been unable to pay back customers as large number of people gathered to withdraw their deposits.
The two-year pilot programme for curbing transactions will be expanded to Zhejiang and Shenzhen province in October this year, encompassing 70 million people in three provinces.
There are reports that after a group of depositors rushed to withdraw cash, Baoding Bank in the Baoding city of Hebei province said that people should not believe in or spread rumours.
The Yangquan commercial bank also released a similar statement after the depositors rushed to the local branches in anticipation of the bank's inability to pay back.
New Delhi, Aug 8 (IANS) Public sector banks would need to increase their provisioning buffer factoring in the incremental provisioning requirement on restructured loans and potential NPAs, a report said.
To discourage rampant and unviable restructuring, the RBI has now mandated that banks will be required to make high provisions at 10 per cent on restructured retail/corporate loans (20 per cent on corp loans for banks outside inter-creditor agreement).
According to analysts, higher provisioning cost would deter unwarranted restructuring. But, this would put pressure on the PSBs to accelerate the pace of increasing their provisioning buffer or disallow restructuring, even in genuine case of stress due to the Covid-19 pandemic.
"Assuming Covid-19-induced stressed loans at 10-15 per cent and at least 50 per cent restructured in the worst case, our rough calculations show systemic level immediate additional provisioning cost at 10 per cent could be 50-75 bps," Emkay Global Financial Services said in a report.
This would mean certain banks would fare better while restructuring loans under stress owing to the pandemic. While ICICI/Axis carry contingent provisions of 125-130 bps, HDFCB/KMB/IIB/RBL have around 60 bps. But large PSBs have contingent provisions of just 10-15 bps.
"Thus, we believe that some banks may have to further accelerate their provisioning buffer, factoring in the incremental provisioning requirement on restructured loans and potential NPAs," Emkay said in its report.
The provision required for restructured loans, however, provides for reversal of 50 per cent of provisioning on retail loans in case the borrower pays 20 per cent residual debt, and the balance 50 per cent on payment of another 10 per cent without slipping into NPA.