Provisioning
- August 6, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
No Comments
Subject: Economy
Context:
Banks need to rise the provisioning for expected bad loans rising due to pandemic hit economy
Concept:
- Banks have to set aside or provide funds to a prescribed percentage of their bad assets.
- The percentage of bad asset that has to be ‘provided for’ is called provisioning coverage ratio.
- Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-performing assets and indicates the extent of funds a bank has kept aside to cover loan losses.
- Thus, provisioning coverage ratio is the percentage of bad assets that the bank has to provide for (keep money) from their own funds.