Citing the current economic conditions, Shaktikanta Das commented on the structural issues in the banking sector. He stated the need for banking reforms for a swift resolution to stressed assets.
Banking Reforms
In a meeting with the heads of major public sector banks, RBI governor stated that Banks will face certain challenges due to prevailing conditions. He further said that banks must proactively tackle the situation. Besides, he appreciated the improvement in the banking sector despite such a slowdown. Emphasizing on stressed assets, he stated that resolution must be carried in a coordinated manner.
Digitization
Shaktikanta Das also highlighted the importance of digitization in the banking sector. He encouraged the banks to follow focused outreach activities to digitalize banking processes in certain districts of states and UTs. Besides, he discussed including non-bank lenders in diverting credit to productive sectors of the economy. There were discussions about the transmission of monetary policy rates into lending rates of banks to final borrowers.
The Revival Signs
Though the banks lending has decreased as compared to previous years, the banking sector is improving. Even in the slowdown, retail and housing loans have picked up by 17% and 19% respectively. Shaktikanta Das, in an interview, called this as a transitory phase where corporate, banks and NBFCs are cleaning their balance sheets. About the inflation, he said that the numbers grew on account of major crop damage.
Other Issues
He further clarified that banks have identified the NPAs. The classification of NPAs by banks suffers a lack of application of proper regulatory frameworks of RBI.
On settling of the PMC fraud case, he said that RBI is working on to improve its supervisory mechanisms. The presentation of shady records has delayed case solving. An external agency carried out forensic audit and results expected soon. RBI predicted a 6.1% GDP growth rate in October and cut it down to 5% in the next two months. The regulator is also working towards adopting accurate mechanisms for growth forecasts.
To conclude, though slow, the revival signs are making a way for the economy to recover in the future.