No rethink on deadline for banks to clean up balance sheets: RBI deputy governor

On NPAs, Mundra said the private sector banks have "apparently" performed better than their PSB peers

The Reserve Bank of India has no plans to revisit the deadline of March 2017 it had set for banks to clean up balance sheets, Deputy Governor S S Mundra said here on Friday.

“I think we have made it quite clear that we expect that the banks take proactive and conservative approach. December was the first quarter. And, from the few results which have come, you might have seen that banks have started taking those steps. So, there is no reason or trigger to really have any revisit on those things,” Mundra told reporters on the sidelines of a programme organised by ICFAI Foundation for Higher Education.

The RBI governors recently announced a March 2017 deadline for banks to clean up their balance sheets which are plagued by high incidence of bad assets. The restructured and bad assets combined together have gone over 13 per cent.

On NPAs, Mundra said the private sector banks have “apparently” performed relatively better than their public sector counterparts after the global financial crisis. Replying to a query on the Bankruptcy Code, which is currently under discussion, he said it would help lenders take tough decisions to deal with “litigant borrowers”.

“The issue is the legal system available today. I think it makes it possible for the large borrowers to stall the system for a very long time. And, in the process, I think the small borrowers are dealt with more severely, while with the large borrowers you cannot apply the same level of rigor over them,” he said.

"I think the Bankruptcy Code, which is presently under discussion and expected to become a legislation soon, would be an important tool in dealing with this kind of issues," he said.

On lending to start-ups, he said they may fall under either manufacturing or service sectors, and that they need equity push in early stage. "However, banks are designed more to offer debt component at a later stage," he said.

On the proposed electronic trade receivables discounting system, Mundra said the RBI has invited expression of interest from companies and a couple of them have been shortlisted.

To help micro, small and medium enterprises (MSMEs), the RBI had in 2014 permitted setting up of an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.