Restructured Housing Loan is NPA- RBI

RBI in an exclusive directive to strengthen the Nations banking system has asked them to treat Restructured Loans to Builders and Real Estate Developers as NPAs.

What are Restructured Loans ?
When borrowers are facing difficulties in repaying loans, typically banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates. Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check.

Thus banks are putting pressure on Realty developers to be realistic to market forces on the selling price and dispose of the housing stock so that Banks balance sheet is not weakned, otherwise they will face a lot of difficulties. Mr. Naryansami of BOI said,

Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers.

Hopefully, bankers will kick the ass of these greedy and troubled Real Estate Developers and make them sell the housing stock at fair prices affordable by the Indian consumer.

Update: Here is how Banks how disbursed Loans to Real Estate and Construction in H1-FY2009 despite slowing economy and Global Crisis. That is why Banks are on their toes to recover those loans before they become an NPA.