Attributing rising bad loans to business cycle, the Reserve Bank of India on Tuesday said that non-performing assets (NPAs) are not posing any threat to the banking system.
“It (NPAs) has not reached a point where it threatens the integral system. I don’t think we are at that point,” said Dr Subir Gokarn, RBI Deputy Governor.
He attributed the rise in NPAs to various domestic and international reasons. “There is an overall business cycle movement. There is overhang from the previous shock of 2008—09...,” he added.
Non-performing assets of state-owned banks have increased to 2.31 per cent of their assets at the end of March 2011, from 2.27 per cent in the year-ago period.
Amid concerns of rising NPAs in the banking sector, the country’s largest lender SBI had put in place a separate mechanism to contain them. SBI’s NPAs had reached a three-year high of 3.52 per cent of loans in the quarter ended June 30.
Savings account rate
On the RBI’s decision to deregulate savings account interest rates, Dr Gokarn said the move would increase competition among banks for retaining customers.
Earlier, banks were mandated to give 4 per cent interest rates on such deposits, but with the freeing of rates, several private sector lenders, such as YES Bank and Kotak Bank, have hiked rates to 6 per cent.
“We did it at a time when banks are not grappling for deposits. The deposits are quite healthy. The gap between deposit and credit growth is quite narrow now,” Dr Gokarn added.
Referring to inflation, he said, the structural drivers of inflation are still strong and the RBI expects it to remain high through October and November.
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