Are banks disclosing all bad loans?
There are a number of checks and balances to ensure that NPAs announced by banks convey the true and fair picture. We also supervise banks and go into their portfolios if they have declared their NPAs … and we examine divergences and bank managements are hauled up where there is divergence. In that case they have a pretty strong discussion with SS Mundra in which he hauls them over the coals for doing what they did. And increasingly we are turning towards taking actions against such divergences. So it is not that these things get done with impunity. We are certainly monitoring and trying to urge that restructuring when done is deep, is appropriate so that projects are put back on track. I think that is what we need for the continuing health of not just the banking system but the economy.
On forebearance for bad loans:
There is a thin line between forbearance and flexibility. We have always said that we are for flexibility. We have said no problem in lending to a project which is a non-performing asset so long as it is meant not to evergreen but to put the project back on track and get it going. Similarly, we are examining 5/25 cases to see that they are being used for the right purposes. The point is not to postpone the problem into the future. In fact we are insisting that there should not be significant moratorium on the repayment under 5/25 scheme. The point, however, is to ensure that what was structured as repayment in a short while for a long project, the 5/25 rule can be extended. The primary focus is to get the project back on track rather than postponing the problem into the future.
How independent is the RBI?
I think there has been a healthy respect between the government and the central bank. And the RBI ultimately decides what the course of the monetary policy will be. The government has the right to give directions to the RBI and tell it what it should do. There is a clause in the RBI Act. (But) that direction has never been given in the history of RBI. You have to distinguish what is de jure from what is de facto (autonomy). I think de facto, the RBI is independent.
Payment bank licence by month-end:
I hope to announce at least one set of bank licences (either small finance or payments banks) before the end of this month. The central bank has received recommendations from the external advisory committee on payments banks chaired by RBI board member Nachiket Mor and the one on small finance banks chaired by former Deputy Governor Usha Thorat. An internal committee of the RBI, which is composed of Deputy Governors and the Governor, is going through each of these applications again. Finally, a set of recommendations will be presented to the RBI board which will decide the final list of successful applicants.
FPI cap hike in government bonds:
The RBI is in talks with the finance ministry to raise the foreign portfolio investment (FPI) cap in government bonds. After discussions, the RBI will formulate a framework to raise the investment limit for such investors in government debt securities, which will be pegged to the rupee against the current practice of linking it to the dollar. The goal of this medium-term framework will be to enlist FPIs in market development within prudential limits which we set even as they are attracted by the rates in domestic bonds.