RBI asks banks to make extra provisioning on top 20 business houses

Subject: economy

Context:

The Reserve Bank of India has advised banks to set aside specific provisioning towards their exposure to top 20 conglomerates of India.
Some of large corporations also have significant foreign debt exposure in the form of bonds and loans and it would be better to be step ahead of the curve to ensure that banks in India don’t suffer because of the global turmoil.
Reliance Industries, Adani group and Vedanta are conglomerates to name a few, with heavy exposure to foreign debt.

Provisioning:

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.