'Das is friendly, but he finally does what he does. The quality of engagement is very good.'
'It is nice that the banking system is in good shape.' 'It is a little early to call it too good because I think it was too bad in the past.'
Raghuram Rajan's 'surgery' uncovers more bad loans
'The concern that the bad bank may create a moral hazard for the system is extremely valid.'
Indeed, there were frauds, and the politician-banker-industrialist nexus played a role in the rise of NPAs, but governance issues in Indian banking are far more nuanced and complex, reveals Tamal Bandyopadhyay.
The bank saw loans worth Rs 7,000 crore (Rs 70 billion) slipping into NPAs during the March quarter, taking the gross NPA ratio to 5.82 per cent.
Finance minister Nirmala Sitharaman on Wednesday exuded confidence that inflation would further decline and the government is on track to meet its budgetary target for deficit and said that there is no fear of stagflation in India. Replying to the debate on first batch of Supplementary Demands for Grants 2022-23 in Lok Sabha, the finance minister said inflation has come down and it is now in the tolerable band of the RBI. Inflation has been declining since April 2022 and it is declining further, she said.
Reserve Bank of India Deputy Governor Viral V Acharya further said that the impact of the notes ban would only be temporary and would help in bringing informal sector into the mainstream economy.
'I would say restore the banks to health, get active board composed of professionals, then there will be an ideal situation for merger.'
For now, the concerns over bad loans have taken a back seat; a bigger challenge for the banking community is credit growth, explains Tamal Bandyopadhyay.
The speed at which he led the central bank in different areas -- ranging from internal reorganisation to inflation fighting, stabilising the currency, taking on rogue corporations, cleaning up bank balance sheets, and opening the sector -- makes one believe that Rajan knew he had only three years to do his job. A fascinating excerpt from Tamal Bandyopadhyay's MUST-READ Roller Coaster: An Affair with Banking.
The stress in the banking sector, which mirrors the stress in the corporate sector, has to be dealt with in order to revive credit growth.
Banks have collected about 1,500 kg of gold from temples and trusts under the Gold Monetisation Scheme (GMS) since its launch last November.
According to the RBI's Financial Stability Report, the industry's gross bad-loan is at a 14-year high. As RBI's March 2017 deadline for banks to clean up soured credit looms closer, Shailajanand Mishra takes stock of just how bad the situation is.
SBI has been reeling under a mountain of bad loans for the past few years as the key sectors in the economy are faltering.
Consensus continues to be cautious with analysts pointing towards tougher days ahead
Relations with the government, the bank's majority owner, are a tricky issue for all SBI chiefs, and, like all his predecessors, Khara will be closely watched for his equations with the finance ministry representative on the SBI board.
Rajan said it is hard to offer an objective self-assessment but the RBI should probably have raised more flags about the quality of lending in the early days of banking exuberance.
'We don't know how much the Pay Commission outflow will be.'
Progress on the steps taken by Governor Shaktikanta Das' predecessor Urjit Patel to restore financial system integrity will be a key thing to assess any damage to the institution, Subramanian said.
The principal challenge for Rajan's successor is to work with the Bank Board Bureau and the finance ministry to complete these processes of banking reform.
Resolution to the bad loans problem has to be incremental, and the RBI has to ensure NPAs are not swept under the carpet, HDFC chairman Deepak Parekh tells Joydeep Ghosh.
Recpaitalising banks through taxpayers' money will not solve the NPA problem.
Rajan, who has been warning against competitive monetary policy easing by central banks, however, said the situation is different in India where RBI still needs to bring down lending rates to spur investments.
RBI governor on the stress in public sector bank due to NPAs, and what is needed to be done to get the system back on track.
Banks are in need of government support to manage the stressed assets
The most preferred CoCo bonds are those through which banks raise their additional Tier-I capital.
"I am an academic and I have always made it clear that my ultimate home is in the realm of ideas," Rajan said in a letter to staff.
Public sector banks' need for capital should be used to make fundamental reforms to their governance and management.
Rajan tells RBI colleagues he will be returning to academics
While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on letters of undertaking (LOUs) issued by PNB. Foreign bank branches too are under investigation.
Once these banks start showing losses, they will not be able to pay dividends to the government nor pay taxes, which will further aggravate the situation for the government as its return on investment as an investor would be very negligible for the next few years, says M V Subramanian.
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