India's commercial banks are been directed by the Reserve Bank of India to be a little easygoing at this time of slowdown. RBI asks banks to find an alternative way of their loan restructuring. The banks are currently terming the accounts of customers who are unable to make their interest payments for two consecutive terms.

The RBI decision gives a respite to many companies including the small and medium entrepreneurs (SMEs) that are hit hard by the financial slowdown. On a meeting of the Bankers' Club, Kolkata, RBI deputy governor V Leeladhar has insisted the banks to be more lenient at this time of economic downturn.

A senior banker who attended the meeting said, "The deputy governor has told us to consider the option of rescheduling doubtful loan accounts so as to contain the rise in non-performing assets (NPAs)."

RBI says that the restructured loans can be treated as standard assets in banks' books. An official from RBI said, "Banks should take decisions on rescheduling loans purely on business merit and if there is fair chance of the concerned company's revival. That was the essence of Mr Leeladhar's comments."

On the other hand, bankers want changes in the norms related to non-performing assets (NPAs) to help them overcome the problem of rising defaults in the small scale sector. They have asked Mr. Leeladhar to relax the NPA provisioning norms from 90 days at present to 180 days. It is believed that the NPA account of the banks will rise due to ongoing financial and economic downturn.

Mr Leeladhar also said that the banks are advised to plan for the long term. "The banks would, accordingly, be well advised to ensure that their business strategies and decisions are guided by the longer-term perspective of the systemic and macro-economic developments, and are not unduly influenced by the current episode of exceptional events," he said.

In its review report RBI stated: "Banks should pay attention to maintaining credit quality. In pursuit of this objective, they should focus on stricter credit appraisals on a sectoral basis, monitor loan to value ratios and calibrate their credit portfolio in tune with their asset-liability projections."

The central bank has also reminded the bankers that the that measures announced by it to overcome the crisis are ad-hoc in nature and therefore the banks need to move cautiously considering the long run prospective.