The IMF has said that the recapitalisation of India\u2019s public sector banks should be part of a broader package of financial reforms to speed up the resolution of their massive non-performing assets, which has attracted attention in the backdrop of the Nirav Modi case.<\/p>\n
The recent policy reforms to address vulnerabilities in the banking and corporate sectors in India have been significant, International Monetary Fund Deputy Managing Director Tao Zhang said ahead of his visit to India.<\/p>\n
The asset quality review, initiated by the Reserve Bank of India (RBI) in December 2015, prompted banks to take steps to recognise all nonperforming assets and ensure appropriately provisioned balance sheets by March 2017. Other important steps include the new Insolvency and Bankruptcy Code, adopted in May 2016; and more recently, the announcement of a major recapitalisation of India\u2019s PSBs, he said.<\/p>\n
According to a recent Assocham-Crisil study, India\u2019s banking sector will be saddled with gross non-performing assets (GNPAs) worth a staggering Rs 9.5 lakh crore by March-end, up from Rs 8 lakh crore in the year-ago period.<\/p>\n
\u201cWhile all are welcome steps, we think the PSB recapitalisation should be part of a broader package of financial reforms to speed up the resolution of NPAs, improve PSB governance, reduce the role of the public sector in the financial system, and enhance bank lending capacity and practices,\u201d Zhang told PTI in an interview.<\/p>\n
Zhang, however, did not respond to specific question related to the case of Indian diamond merchants Nirav Modi and his uncle Mehul Choksi, who are being investigated for their alleged USD 2 billion swindling of money from the Punjab National Bank.<\/p>\n
\u201cWe have seen the reports. As a matter of practice, we do not comment on the operations of individual financial institutions. In general terms, what I can say is that we support the authorities\u2019 ongoing efforts to strengthen the soundness and resilience of India\u2019s financial system,\u201d he said.<\/p>\n
A team of experts recently conducted an assessment in the context of India\u2019s participation in the IMF\/World Bank Financial System Stability Assessment Program (FSAP), he noted.<\/p>\n
\u201cThe experts found that the RBI has made progress in strengthening banking supervision since the previous assessment in 2011. For instance, a risk-based supervisory approach has been introduced and Basel III norms have been implemented, as is now increasingly common around the world,\u201d Zhang said.<\/p>\n
\u201cNevertheless, the experts recommended legal changes to enable the RBI to extend all the powers currently exercised over private sector banks to public sector ones; in particular, regarding Board member dismissals, mergers, and license revocation,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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