Free Press Journal

‘RBI tries to clarify its role in NPAs, banks’ lending decisions’


Mumbai : In order to put an end to all the misinformation, the Reserve Bank of India (RBI), deputy governor, S S Mundra said that banks under the revised prompt corrective action (PCA) framework can continue to lend. He also added that RBI does not decide on any bank’s decision on who they should lend to.

He said this during India Banking Reforms Conclave 2017. This came after financial regulator witnessed some level of misinformation spread across various medium about the role of the regulator in NPAs (non-preforming assets) and revised prompt corrective action (PCA) framework. He stated that there was a series of misinformed communication that was circulated in some sections of media after circular dated April 13, 2017 on revised PCA was released. He stated that nine banks (under PCA framework) can continue to lend even though RBI continues to monitor them.  He added in the era of social media, things have become tricky. Spreading of misinformation can have a completely different impact. He pointed out that today people share information in social media without understanding the information completely. “While social media has been useful to spread the right kind of information, it is also vulnerable to vested interest for spreading misinformation,” he stated.

Commenting on one specific incident, he said that one news anchor said that banking system will sink due to Rs 7 lakh crore gross NPAs. He went on to clarify that gross NPAs mean NPAs, restructured asset, some of the potential stressed asset. “But any account becoming NPA does not mean that the banking system will sink as one of the channels claimed.”

 Yet another myth, he pointed is around Rs 6 lakh crore lend to 10 companies/individuals and RBI’s role in this decision. He stated that all industrial conglomerates have several entities within the group and it is not right to assume that all entities under such group is under stress and all of them will simultaneously default.

 “Also, RBI is a regulator in the financial sector and it is not in anyway connected to the decision of the bank, as speculated by the anchor,” Mundra stressed.

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