Bad
loans in the banking system may have peaked and the situation relating to
non-performing assets is likely to improve from now on, Deputy Governor of Reserve
Bank of India (RBI), Anand Sinha said here.
"Given the current situation...looks like there would not be undue alarm in the near future. So, assuming that things do not deteriorate in a very significant way, the NPAs might have peaked or the asset quality might have bottomed out. The expectation is that from here on the asset quality should improve," Sinha said in an ASSOCHAM event here.
However, he said, NPAs are the reflection of the stress. "NPAs are the reflection of the stress on the system. We need to manage it well and we believe that we can manage it better. We can reduce the effect of downturn," he added.
Bad assets in the banking system have seen a rapid rise in the recent past and crossed Rs 1 lakh crore mark by the end of second quarter last fiscal on the back of continuous hike in interest rate by the RBI.
Sinha, however, said NPAs didn't pose any systemic risk as found out in the stress-test done by the central bank.
The guidelines for Basel-III norms would be out today, he said. "There will be some kind of impact on the return on equity (RoE) due to high capital requirement provisions under the Basel-III. However, it won't be much."
The Non-Banking Financial Companies (NBFCs) need to be tightly controlled in order to reduce any kind of shadow banking, he stated. "After the global recession, there is an increasing surveillance of the shadow banking system. In that context, NBFCs should be tightly controlled, so that it doesn't pose any systemic risk."
He also said that RBI is looking into the Thorat committee report on NBFCs, and will come up with final guidelines.
As to the growth of domestic economy, he said factors such as global commodity prices, especially the crude oil prices, widening current account deficit and supply side issues in protein food items pose risk to the growth
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