Mumbai: The Reserve Bank of India (RBI) has come across instances of banks using innovative ways to conceal the true status of stressed loans, governor Shaktikanta Das said, raising concerns over attempts to evergreen loans.
Evergreening of loans is a practice by which banks extend fresh loans to a borrower who is on the verge of a default, helping them repay old loans.
“To mention a few, such methods include bringing two lenders together to evergreen each other’s loans by sale and buyback of loans or debt instruments; good borrowers being persuaded to enter into structured deals with a stressed borrower to conceal the stress…" Das said at the Conference of Directors in the Boards of Banks, organized by RBI.
Ways to evergreen also include the use of internal or office accounts to adjust the borrower’s repayment obligations; renewal of loans or disbursement of new or additional loans to the stressed borrower or related entities close to the repayment date of the earlier loans.
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