Reserve Bank of India (RBI) Deputy Governor N.S. Vishwanathan on Friday said the provisioning requirements for NPA (non-performing asset) accounts referred for insolvency resolution are “nothing unusually large”.
Speaking at a session on Regulations & Financial Stability, organised by the Merchants’ Chamber of Commerce & Industry, he said that the cases referred for resolution under the Insolvency and Bankruptcy Code (IBC) were likely to be those which could not be restructured outside the Code.
He said that the problem of stressed assets in the banking system in India in general, and public sector banks, in particular, was a “matter of serious concern.... there is need to strengthen bank’s balance sheets,” he said.
Inadequacy of capital should not be the reason for under-provisioning, according to him. Provisioning should be made so that resilience is built in the balance-sheets, he said.
He emphasised the need to strengthen public sector banks’ balance sheets so that they could generate credit growth. “There is a correlation between a strong bank balance sheet and ability to deal with stressed assets as well give credit,” he said.
Mr. Vishwanathan cautioned against threats posed by technology saying that inadequate cybersecurity can be a problem. To a query on bitcoins, he said that the central bank was still working on a policy on cryptocurrencies. He, however, declined to provide any further details in this regard.
Earlier, Pawan Kumar Bajaj, MD and CEO, United Bank of India, said most public sector banks were struggling with capitalisation issues. “There were issues of few takers as well as high costs,” he said. He said that operating profits of banks was being “taken by provisioning”.
