Current level of NPA resolution untenable, says Urjit Patel

RBI Deputy Governor SS Mundra said discussions are centred around how to act faster on joint lenders’ forum decisions, enhance the number and role of oversight committees, or whether to look at sector or size-specific problems while tackling resolution.

“We are yet to get the final results of Q4 which has just ended. But based on the figures that were available for the December quarter, the various indicators of the stressed assets have further deteriorated during this period. Though there had been positive signal… the pace of declaration of new NPAs and formation of new NPAs had relatively come down. The provision coverage ratio has more or less remained stable. Resultantly, the cost of credit has come down,” Mundra said. Total stressed assets in the banking system are close to Rs 14 lakh crore.

Mundra said the current situation will put a pressure on capital for the banks, especially for the state-run ones. As resolution of the stress comes into the foreground, Mundra said there is a need to understand that there cannot be a ‘one size fits all’ approach and advocated adoption of various tools. Though the RBI had come out with various schemes to tackle NPAs, they have failed to stem the deterioration in bad loans. “The message that we are trying to give is that all these instruments are meant for resolution in a serious sense and not for postponement of the problem. That will be the focus going forward,” he said.