India must address banking sector crisis to support investment, inclusive growth agenda: IMF

India must address the ongoing crisis in its banking sector to support investment and inclusive growth agenda, the IMF said today.

International Monetary Fund Spokesman Gerry Rice responding to a question on India's banking sector crisis said Indian authorities have made progress in addressing the stock of non-performing assets and were taking further measures to deal with the flow problem.

"Addressing the banking sector balance sheet issues and improving the performance of particular public sector banks is a very important issue for India to support investment and its inclusive growth agenda," he told reporters at his bi-weekly news conference.

"These steps include the recognition of these non-performing assets, the resolution framework under the Insolvency and Bankruptcy Code. It's in an early stage, but we think that's an encouraging development," Rice said.

The non-performing assets (NPAs) touched Rs 8.31 lakh crore at end-December 2017.

Rice said it was a positive step as a more proactive approach was being taken to identify and closely monitor asset quality issues.

These needs to be complemented by further governance reforms in this area, especially regarding the public-sector banks to materially improve risk management and operations, he added.

"But we welcome the authority's intention to make public sector bank recapitalisation contingent on measures to strengthen governance and operations and encourage the accelerating implementation of the ongoing reforms," Rice said.

In October 2017, the government had announced a bank recapitalisation plan of Rs 2.11 lakh crore over two fiscals, 2017-18 and 2018-19. In the this fiscal, the government has budgeted a capital infusion of Rs 65,000 crore.