The Reserve Bank of India (RBI) has lauded the banks in the way they have cleaned up their balance sheets. “Broadly speaking, we are comfortable with the recognition process as banks have certainly taken a lot of steps. Some banks have taken more steps than we require them to take, and so the culture of cleaning up seems well-embedded as well as a culture of recovery on the loans,” RBI Governor Raghuram Rajan said.
In his three-year tenure, Rajan has laid down several steps to deal with bad loans. Some of these are the 5/25 scheme, strategic debt restructuring, Sustainable Structuring of Stressed Assets (S4A), tightened willful defaulter norms and also introduction of Joint Lenders’ Forum, Special Mention Account and Corrective Action Plan for quick resolution of stressed assets.
The governor said the silver lining was that the approach towards these schemes was changing and the attitude was no longer to postpone recognition. “We are working with the banks to make sure that any impediments are rectified. Again and again, we want to emphasise that we do not want to go back to the old days of forbearance.”
The regulator had also conducted an asset quality review (AQR) and had given banks a deadline to clean up their balance sheets by FY17. Going ahead, RBI believes it doesn’t need to take a re-look at this deadline.
“Overall, there is no significant elevation in the overall percentage of stressed assets. In the pace of generation of new NPA, there is a clear deceleration. That is what would be the road map. The overall movement of banks towards that direction is getting more sure-footed” if no definite resolution is on the cards, Deputy Governor S S Mundra said.
But according to a recent FICCI-IBA survey, 85 per cent of the banks who had participated said they had reported a rise in non-performing assets (NPAs) during the January-June 2016 period.