Slowdown of credit pre-dates banks drive against NPAs: Rajan

New Delhi, Sept 3: The slowdown of credit growth in India is not the fallout of state-run banks attempting to resolve their massive non-performing assets (NPAs), or bad loans, problems and pre-dates the recent efforts by banks to clean up their balance sheets, former RBI Governor Raghuram Rajan has said. Rajan describes how the Reserve Bank of India’s (RBI) repeated attempts to seek a resolution of stressed assets issue met with tepid response from bankers. “As we found banks reluctant to recognize problems, we decided not just to end forbearance but also to force them to clean up their balance sheets. The Asset Quality Review, initiated in 2015, was the first major exercise of this ture in India,” he writes. A study by industry lobby Assocham said private investments are unlikely to pick up before 2019 owing to low capacity utilisation and weak balance sheets.

NPAs have risen to over Rs 9 lakh crore and by the Banking Regulation (Amendment) Bill passed by Parliament last month, the RBI has been given power to refer these cases to the Insolvency and Bankruptcy Board. The new law also has provisions empowering the RBI to issue directions to banks for resolution of stressed assets. (IANS)