Need to align regulatory standard with best global practices: Rajiv Kumar

Financial Services Secretary Rajiv Kumar Friday said the government is not seeking relaxation in the RBI's Prompt Corrective Action (PCA) framework but emphasised the need to align banking regulations with best global practices.

He also said that domestic regulation are more conservative and stringent as compared to international best practices.

"Nobody can stand on its leg if you ease anything...Therefore what is being talked about is that it (our regulations) is aligned to best practices, which exist in the world. Take it from the best, align it to it, and don't keep it higher than that. So, no relaxation of any norm," he said when asked if the government has sought relaxation of PCA framework of RBI.

PCA framework puts restrictions on financially weak with the objective to halt the deterioration and reverse the trend.

As many as 11 out of 21 banks are under the RBI's watchlist. Of these, two banks, Dena Bank and Allahabad Bank, are facing restrictions on business expansion.

Last month, state-run banks had requested the government for relaxation in PCA guidelines as these were indirectly impacting their lending ability.

However, RBI Deputy Governor Viral V Acharya earlier this month said imposition of the PCA was essential for the revival of financially weak banks and deepening reforms in the banking space.

The PCA framework is an essential element for safeguarding overall financial stability, he had said.

Without giving details of discussion with the RBI on the PCA framework, Kumar said, "there is no easing that will be required, there is no case for easing of any norm what is being talked about...what is required is aligning it with best international practices".

On the issue of liquidity crunch mostly for non-banking finance companies, Kumar said that government is concerned about both liquidity and asset quality concerns.

"Very soon you will be hearing. Something is being worked out," he said on the sidelines of an event organised by SIDBI.

On the issue of providing capital to state run lenders, Kumar noted that any decision will be taken after the second quarter results.

"We will first assess the results and decide," he added.