Mumbai: The RBI chief, Governor Urjit Patel said that State-run banks will need more capital to resolve bad loan problems reflect on their balance sheets, More than $150 billion of bad debt is compressing the credit growth in Asia’s third-largest economy and the government, The central bank have been trying to ease the burden on state-run lenders, which account for 70 % of all lending, to get more credit flowing, the regulatory challenges of dealing with bad loans were compounded by the weak capital position of some banks, particularly those owned by the government.
The success and reliability of all the resolution efforts would be critically dependent on the strength of public sector bank balance sheets to absorb the costs; the government and the Reserve Bank are in dialogue to prepare a package of measures to coast up capital in a time bound manner, Extra capital could be raised either by getting funds from the market, through the government weaken its chance in state-run banks, through additional government capital infusions, or the sale of non-core assets and mergers among lenders The early signs are supporting, conversely we all must recognize it will be a long drag before the projected goal are fully achieved,” The Patel also says that banks, whose weak lending regulation, he liable for the mountain of problem-loans, he would need to take haircuts as they tackle bad-debts.
The Moody’s Investors Service said in June that the 11 Indian state-run banks that it rates could need up to Rs. 95,000 crore ($14.8 billion) in equity capital by March 2019, far above the Rs.20, 000 crore the government plans to inject into state banks. The Finance Minister of India, Arun Jaitley said on Saturday that the efficient management was needed to ensure a company’s performance did not come to decline and that its valuable assets were preserved during the bankruptcy process.
