RBI asks banks to improve credit management system to curb NPAs

Flagging the surge in bad assets levels and requests for loan restructuring, Anand Sinha, deputy governor of the RBI said there is urgent need for banks to improve their credit management systems

Mumbai: There is an urgent need to beef up the credit management systems at banks as the lingering global economic turmoil and domestic growth concerns have increased downside risks to financial stability which is evident from rising bad assets, warned Reserve Bank of India (RBI) deputy governor Anand Sinha on Thursday, reports PTI.


"Deteriorating asset quality of banks can be contained by substantially upgrading their credit management systems," Sinha said in his address on the concluding day at the three-day FICCI-IBA banking summit here.


Though Sinha was quick to add that the domestic financial system remains robust, as per the RBI stress tests, he said, "The downside risks to financial stability have worsened due to several global and domestic factors. Our banks are no doubt strong, but there are many challenges we have to live with."


Flagging the surge in bad assets levels and requests for loan restructuring, the deputy Governor said, "NPA levels are higher than what they were a while back. So there is definitely a stress in the system. The amount of restructured assets has gone up. Restructured assets, whether you call it standard or sub-standard, the fact is that even if they are standard, they represent stress in the system," he told reporters later.


While the overall bad assets in the system rose to 5.7% in FY12, from 4.2% a year ago, the quantum of restructured loans is set to cross Rs2 trillion by the end of this fiscal.


Listing out the challenges before the domestic banks, Sinha said the immediate challenge facing the banks is arresting the deteriorating asset quality, while the mid-to-long term challenge is to raise capital to meet the Basel III norms.


"Overall improvement in the risk management systems, upgrading technological platforms and building up of specialised skills in the banking system are the challenges which will distinguish the more successful ones from the others. It is important that competitive pressures are not allowed to override basic prudence," Sinha warned.


Opening the event on Tuesday, Governor Duvvuri Subbarao had pegged the overall capital needs, including non-core capital, of the banks at Rs5 trillion, out of which the state-run banks, which control over 70% of the system, need a whopping Rs90,000 crore from the government in fresh core capital.


Considering the precarious finances of the government, the Governor had suggested that the government could bring down its stake below the mandated 51% in banks which would bring down the Basel III burden to Rs70,000 crore on the government.


Later addressing the media, Sinha said there are more downside risks on the macroeconomic front as the growth has slowed down partly because of the world situation.


On the global front, he said one of the most important challenges he sees in the days to come is the exit from the accommodative policies adopted since the 2008 crisis management phase and to ensure that financial imbalances which led to the present crisis, don't build up again.


The comments came on a day when the European Central Bank announced renewed bond purchases to help boost the sagging Eurozone economies and the US Fed is almost certain to announce the third round monetary booster to the American economy next week.




5 years ago

Banks in India ( both Public Sector and Pvt Sector) has all these years been fudging NPA figures. In March 2012 the NPA in Public Sector Banks ballooned because it was system generated one. even today it is fact that turnover figures in borrowal accounts are all irrelevant because without any genuine trade related transactions circular transactions are put thro thanks to quick transfer thro facilities like NEFT and RTGS by which amount Rs crores can be put thro without any funds in the account.

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When the PMO fails to defend its master over Washington Post story

Was there any need for the PMO to defend criticism by the Washington Post article? However, its communications advisor tried and in the end, all the PMO managed was to get a 'sorry' from the author and that too not for the article but for a technical issue of his website

The Prime Minister's Office (PMO) has lodged a formal protest with Washington Post for an article that had criticized prime minister Manmohan Singh, terming it as “unethical and unprofessional” conduct of the journalist, Simon Denyer. Simon is also the India bureau chief of Washington Post.


In a letter, Pankaj Pachauri, former journalist with NDTV and now communications adviser to the PMO, said, “...the story was ‘totally one-sided’ as the journalist ‘never’ got in touch with the PMO for its version.”


Here is the letter written by the PMO and point-by-point reply by Simon Denyer, the author of the article. Both the letters are also available on Washington Post’s blog.


PMO: Despite all lines of conversations open, you never got in touch with us for our side of the story though you regularly talk to me about information from the PMO. This story thus becomes totally one sided.

Simon: I requested an interview with the PM on three occasions, and also with TKA Nair, Advisor to the Prime Minister, and with Pulok Chatterji, Principal Secretary in the Prime Minister’s Office. Those requests were either ignored or declined.


PMO: You have been telling the media here in India that your request for an interview was declined though the mail below says clearly that the interview was declined “till the Monsoon Session” of the Parliament which gets over in two days.

Simon: When I made my final request for an interview with the PM in July, I was told on July 30 “The PM has declined all interview requests till the Monsoon session is over.” At that stage the current session of parliament (known as the Monsoon session) of parliament had not even begun. There was no mention of the possibility of an interview afterwards. In any case my story touches on the fact that parliament has been adjourned every day throughout the current session by opposition calls for the PM to resign, which is a story I felt should be told, interview or not.

Indeed, we remain extremely interested in speaking to the prime minister.


PMO: When I rang you up to point this out, you said sorry twice though you tell the media here that you never apologised. Your website where we could have posted a reply is still not working, 11 hours after you said sorry the third time for its inaccessibility.

Simon: My apology was for the fact that the website was down and the PM’s office could not post a reply directly. As soon as the problem was fixed, I informed them. I stand by the story.


PMO: The former media adviser to the PM Dr Sanjaya Baru has complained that you “rehashed and used” an eight month old quote from an Indian magazine.

Simon: I spoke to Dr Baru personally on the telephone during the reporting for the story. He confirmed that these sentiments were accurate.



Shadi Katyal

5 years ago

Why are we so thin skin that any truth and criticism written in any domestic or foreign p-aper should offend us.Truth is a
hard pill to digest.
For some peculir reason we get offended at drop of pin.Has enslavedment for centuries left us with some insecureity and genetically so sensative?????.
One thing we fail to eigther understand or able to tell the world that UPA dependes on many poplus parties and so there is no cdenral policy for anything.Why UPA is in power is another question and why failure to control all those scams.
Today world hs shrunk and evryone knows what is going round.
We should thank the forign media that such criticism tells us being watched by the world

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