The Reserve Bank of India (RBI) relaxed guidelines on Monday for lenders restructuring large stressed loans, in a move that could allow banks to more effectively manage bad loans.
Indian banks are grappling with about $120 billion in stressed loans, or 11.5% of the total, and RBI Governor Raghuram Rajan has set a deadline of March 2017 for them to clean up the bad loans on their balance sheets.
The central bank said late on Monday that lenders would be allowed to carve up stressed loan accounts into two categories.
The first is the sustainable debt portion that banks, or a lending syndicate, deem repayable and that the borrower would continue repaying on existing terms.
The second is the …