RESERVE BANK OF India (RBI) governor Shaktikanta Das said on Monday that the central bank has come across instances wherein some banks have attempted to conceal the true status of their stressed loans through the use of "smart" accounting processes.
"During the course of our supervisory process, certain instances of using innovative ways to conceal the real status of stressed loans have also come to our notice," he said at the Conference of Directors of Banks organised by the RBI for private sector banks.
Das noted that despite guidelines on corporate governance, these gaps in certain banks have the potential to create some level of volatility in the banking sector.
Highlighting the methods employed, he mentioned cases where some lenders used smart accounting techniques to artificially enhance their financial performance. These methods include two lenders collaborating to evergreen each other's loans by sale and buyback of loans or debt instruments, and convincing good borrowers to enter into structured deals with stressed borrowers to conceal the stress in the loan account.
This story is from the May 30, 2023 edition of Financial Express Mumbai.
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This story is from the May 30, 2023 edition of Financial Express Mumbai.
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