Skip to main content

RBI promises more effective steps to tackle NPA pain

By

The Reserve Bank of India (RBI) on Thursday said even though there had beenafew positives on the bad loans front, the current level of dud loan resolution was untenable as there had been a deterioration in non performing assets (NPA), and promised new measures to tackle the pain. “The present level of NPA resolution is  untenable,” Governor Urjit Patel said while addressing the media after announcing the first bimonthly policy for financial year 201718.
Deputy Governor S S Mundra, who heads the banking department, chipped in saying “we are yet to get the final result of Q4 which has just ended.
But based on the figures that were available for the December quarter, the various indicators of the stressed assets have further deteriorated during this period.” He  said the positives achieved by the banks includeaslowdown in the accretion of fresh NPAs and stable provision coverage ratios.
The former commercial banker cautioned that the current situation will put pressure on capital for the banks, especially for the staterun ones.
As resolution of the stress comes into the foreground, Mundra said there wasaneed to understand that there cannot bea “one size fits all” approach and advocated  adoption of various tools.
He reiterated RBI was also in talks with the government on how to improve the existing frameworks, and the discussions were centred on how to act faster on joint  lenders´ forum decisions, enhance the number and role of oversight committees, or whether to look at sector or sizespecific problems while tackling resolution.
RBI has introduced a slew of instruments to tackle the NPA menace, which had crossed 9.5 per cent of the system or Rs 14 lakh crore as of December 2016, including strategic debt restructuring, 5/25 restructuring, joint lenders´ forum and Prompt Corrective Action (PCA), which will be out by end April.
Even as speculation rages if RBI will introduce a new instrument or tweak an existing one, Mundra said there can bea “relook” at the existing instruments.
“The message that we are trying to give is that all these instruments are meant for resolution inaserious sense and not for postponement of the problem.
That will be the focus going forward,” he said.
In the policy document, RBI also saidarevised PCA framework will be introduced for banks in mid April.
RBI also increased minimum capital requirement for asset reconstruction companies to Rs 100 crore from Rs 2 crore earlier.
RBI also announced it will be tweaking the capital requirements for partial credit enhancement framework.
It has also decided not to activate the counter cyclical capital buffer at this point of time.
The Business Standard New Delhi, 07th April 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more