Rajan asks banks to clean up books, again

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Mar 05, 2016 09:39 IST
In this file photo, RBI governor Raghuram Rajan laughs while replying to a question during a news conference after the bi-monthly monetary policy review in Mumbai. (REUTERS)

Mounting bad loans dominated discussions among the government, public sector banks (PSBs) and the Reserve Bank of India (RBI), as a two-day offsite ‘Gyan Sangam’ got underway on Friday in Gurgaon.

RBI governor Raghuram Rajan, who has come down hard on banks for indulging chronic defaulters, asked lenders on Friday to clean up their books, sources said.

The central bank had earlier set a deadline of March 2017 to tidy up the bad-loan problem.

In his budget speech on Monday, finance minister Arun Jaitley had set aside Rs 25,000 crore for the government to inject as additional capital into PSBs.

Jaitley will attend the event on Saturday. The first such retreat was held in Pune last year.

The RBI recently eased rules, expanding the base that can count as capital for Basel III norms, a global standard for banks’ minimum capital needs. The move will unlock Rs 25,000 crore into the pool of banks’ lendable resources and allow them to raise more capital.

According to minister of state for finance Jayant Sinha, non-performing assets (NPAs) — loans that do not yield returns — have crossed Rs 8 lakh crore. Almost all banks have seen their profits drop sharply during the last quarter.

Rajan also asked PSBs to upgrade technology and data analytics tool to counter competition from new players, sources said.

Eleven companies have been allowed to start payments banks, while another 10 companies will set up small finance banks. While small banks can perform all activities similar to commercial lenders, though on a restricted scale, payments banks cannot undertake lending operations.

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