Reserve Bank of India today called for recapitalization of state-run banks to help them resolve the NPAs issue in a time-bond manner as bad loans at nine point six per cent of the system is not acceptable.
RBI Governor Urjit Patel said this addressing a National Conference on Insolvency and Bankruptcy: Changing Paradigm, held in Mumbai this morning in presence of Union Minister of Finance Arun Jaitley.
Mr Patel said that gross NPA ratio of the banking system at 9.6 per cent and stressed advances ratio at 12 per cent as of March 2017 is indeed a matter of concern. Saying that the balance sheet of most state-run banks are not healthy enough to take large haircuts, which is a corollary of any bad loan resolution, he called for their recapitalisation.
He said that Government and the RBI are in dialogue to prepare a set of measures to enable state-run banks to shore up the requisite capital in a time bound manner. He added that the government and the RBI are working together to comprehensively address the issue through a multi-pronged approach.
The measures could include a combination of capital raising from the market, dilution of government holding, additional capital infusion by the government, merger based on strategic decision and sale of non-core assets.
The RBI chief also blamed lenders for the mess, saying their poor credit appraisal systems have led to the pile of bad loans, which tops over nine trillion rupees now.