RBI deputy governor says banks need to urgently reduce stressed assets

R Gandhi said the NPAs will impact liquidity and capital in the banking sector

Reserve Bank of India (RBI) Deputy Governor R Gandhi said on Tuesday there was an "urgent" need for banks to reduce their stressed assets, given the impact on liquidity and capital in the sector.

The RBI had received a proposal to limit the number of banks in a lending consortium as a way to improve recovery of loans, Gandhi said in a speech at an industry event in Mumbai. He, however, said such a move would have also drawbacks.

His comments come as the central bank has been pushing banks to reduce the amount of their non-performing assets and start lending again.

The government said in July it plans to inject $11 billion of capital into lenders over the next four years in a bid to help them clean up their balance sheets.