Evergreening: Practice of managing balance sheet
Reserve Bank of India (RBI) has been raising the issue of ‘evergreening’ for a long time now. As per the central bank, the practice is not only unhealthy for the banking sector, but also leads to accumulation of Non Performing Assets (NPAs).
What is evergreening?
Technically, evergreening is the practice of ‘managing’ the balance sheet by means which may not contravene existing laws of the banking sector,but infringe them in spirit.
As per definition, evergreening or evergreening loans are generally doled out in the form of short-term line of credit that is regularly renewed leaving the principal remaining outstanding for the long term.
Under this provision, these loans don’t need the principal sum to be paid-out inside a specified period.
It is also called a ‘standing’ or ‘revolving loan’.
|Way of evergreening