‘Capital adequacy of banks to help system withstand stress’

With the banking sector dogged by the problem of bad loans,a key regulatory panel led by finance minister P Chidambaram

Written by ENS Economic Bureau | New Delhi | Published: June 4, 2013 1:41:06 am

With the banking sector dogged by the problem of bad loans,a key regulatory panel led by finance minister P Chidambaram on Monday reviewed the position of asset quality and capital adequacy of banks in the country.

“It was felt that despite the concerns about some deterioration in asset quality,largely,due to global and domestic economic conditions,the strong capital adequacy of banks would enable the banking system to withstand stress,” the finance ministry said after the seventh meeting of the Financial Stability and Development Council (FSDC).

Gross NPAs of PSU banks have risen from Rs 71,080 crore as on March 2011,to Rs 1.55 lakh crore as on December 2012,of which corporate accounts constitute 53.68 percent. The FSDC also discussed the report of the Financial Sector Legislative Reforms Commission that was submitted in March this year. While acknowledging that some of its recommendations would have to be studied in detail,the panel said that others can be taken up for discussion with stakeholders.

The meeting which was attended by RBI governor D Subbarao,Sebi chief UK Sinha,IRDA chairman TS Vijayan,also reviewed the measures taken for the development of a deeper corporate debt market as well as steps to curb gold imports.

Department of economic affairs secretary Arvind Mayaram said that regulation of chit funds was also taken up for discussion.

Meanwhile,FSDC also discussed the National Strategy for Financial Education that works to promote financial inclusion and financial education in the economy.

While appreciating the steps taken by various agencies for financial inclusion,Chidambaram said should to be taken to encourage and facilitate qualitative improvement in the participation of new subscribers to the financial markets over time.

The strategy is being prepared by the sub committee of the Financial Stability and Development Council,which is led by the Reserve Bank of India governor.

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