RBI measures soon to contain bad assets: FinMin official

RBI will come out with their measures and banks will ultimately follow, says Rajiv Takru

The Reserve Bank will soon come out with measures to contain rising bad assets in the banking industry which touched 3.4% of total assets at the end of last fiscal, a top Finance Ministry official said today.

"RBI will come out with their measures and banks will ultimately follow. Wait for the measures (on asset quality)," Financial Services Secretary Rajiv Takru said.

Talking to reporters after attending the RBI's central board meeting here, Takru said the government is worried about the asset quality and the issue was being addressed.

The sub-committee of Financial Stability and Development Council (FSDC), headed by RBI Governor D Subbarao, yesterday expressed concern over the rising bad assets of state-owned banks and discussed corrective measures.

Asset quality of banks, especially the state-run lenders, has deteriorated in the recent past because of the falling economic growth rate.

As per credit rating agency S&P, banking sector's non- performing loan (NPL) ratio is likely to surge to 3.9% of the total loans this fiscal, and to 4.4% in the next financial year from 3.4% reported in 2012-13.

It has forecast that the deteriorating asset quality and earnings are likely to constrain credit profiles of Indian banks over the next two years.

Earlier, RBI had came out with measures to shield domestic banking system from any systemic risk on account of rising bad assets and restructured assets by raising the provisioning coverage in case of such accounts.

Referring to the proposed bancassurace model, which will enable banks to sell more than one insurer's product to customers, Takru said: "(It is) part of budget announcement. Sooner, it happens the better."