Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
RSS

News

Stress on asset resolution, recapitalisation to improve banks’ balance sheets

Author: IANS/Friday, November 17, 2017/Categories: Banking & Financial Services

Stress on asset resolution, recapitalisation to improve banks’ balance sheets

Mumbai - Reserve Bank of India (RBI) Deputy Governor Viral V. Acharya said asset resolution and bank recapitalisation are expected to strengthen bank balance sheets and improve their "ability and willingness" to lend at rates in consonance with policy rates.

According to Acharya, the RBI has reduced its policy repo rate by 50 basis points since October 2016 and by a cumulative 200 bps since December 2014, but the banking sector's credit growth has remained muted.

"While weak demand for bank credit could be one of the factors leading to the observed slowdown in credit growth, a primary cause of the slowdown has also been the weak balance sheets of public sector banks in view of large non-performing assets which seem to have made banks risk-averse and induced them to reduce the supply of credit: under-capitalised banks have capital only to survive, not to grow," Acharya said at the inaugural Aveek Guha Memorial Lecture at the Tata Institute of Fundamental Research (TIFR).

"The dominance of the supply side factor has also been borne out by the fact that the credit growth of private sector banks remains robust, whereas there has been a sharp deceleration in the credit growth of public sector banks."

Acharya further said the enactment of the Insolvency and Bankruptcy Code (IBC) in December 2016, the promulgation of the Banking Regulation (Amendment) Ordinance 2017 which has since been notified as an Act, and the subsequent actions taken thereunder by the Reserve Bank, have made the IBC a "lynchpin of the new time-bound resolution framework for bank NPAs".

"These initiatives will now be supported by the government's decision to recapitalise public sector banks in a front-loaded manner, with a total allocation of Rs 2.1 trillion, comprising budgetary provisions (Rs 181 billion), recapitalisation bonds (Rs 1.35 trillion), and raising of capital by banks from the market while diluting government equity share (around Rs 580 billion)," Acharya said.

"The two steps together -- asset resolution and bank recapitalisation -- are expected to strengthen bank balance sheets significantly and improve banks' ability and willingness to lend at rates in consonance with policy rates and result in an improved monetary transmission," the Deputy Governor added.

Print Rate this article:
No rating

Number of views (178)/Comments (0)

rajyashree guha

IANS

Other posts by IANS
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free