Raghuram Rajan urges clean-up of bad debt at domestic lenders

BENGALURU, India (Reuters) - Reserve Bank of India Governor Raghuram Rajan urged the country to clean up the bad debt held by its banks, calling it key to achieve stronger economic growth, in his second public appearance since saying he will step down in September.

In a speech, Rajan defended the actions taken by the central bank, including ordering state-run banks to conduct comprehensive asset quality reviews of their balance sheets.

Rajan urged state-run banks and company promoters to deal with the problem, while also calling on the government to infuse capital to the sector - steps he has previously advocated during his tenure.

"To the question of what comes first, clean up or growth, I think the answer is unambiguously "Clean up!," Rajan said in a speech to industrialists in Bengaluru.

The speech is his second public appearance since Rajan unexpectedly said on Saturday he will step down after his tenure ends in September.

(Reporting by Aby Jose Koilparambil and Kanika Sikka; Writing by Suvashree Dey Choudhury; Editing by Rafael Nam)