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 indebtedness of Indian companies has had an adverse impact on the economy's investment climate apart from weakening their performance and seriously impairing the financial health of the banking sector. Unless both the problems are resolved, there is little chance of reviving investment and boosting growth on a sustainable basis, says A K Bhattacharya.
Insolvency professionals feel the bankruptcy code will deter defaulters, but NPAs will not cease unless banks are sensitised on credit appraisal and experts are hired by banks to inspect what is happening with their loans.
The most preferred CoCo bonds are those through which banks raise their additional Tier-I capital.
Indradhanush-II is likely to chart out the process for resolution of non-performing assets.
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.
'There are two pre-conditions for big reforms. One, a sense of crisis and second, fairly concentrated levers of power.' 'India is growing at 7.5 per cent or something close to that.' 'Our levers of power are decentralised, not just between the Centre and states. Power is dispersed and there is no sense of crisis.'
Rajan, as expected, furthered his predecessors' agenda and continued with the same resolution to make India's financial system safer, and direct the economy towards further liberalisation
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.
'We don't know how much the Pay Commission outflow will be.'
'Today, three areas give banks a big headache -- steel, power, infrastructure.' 'Three Cs are very critical in lending -- character, capacity and collateral of the borrower.'
'The entire system acted as cheerleaders to Vijay Mallya. The RBI failed, the banks failed, the auditors of the banks and Mallya failed.'
'The approach towards Mallya is not right because his unit could have been turned around earlier with additional funds from his side and the bank's side.'
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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