Rajan says not clear if India needs 'bad bank'

MUMBAI (Reuters) - Reserve Bank of India (RBI) Governor Raghuram Rajan said on Friday it is not clear India needs a so-called "bad bank" to deal with non-performing loans, adding it would be preferable to push banks to clean up balance sheets themselves.

Rajan, addressing an audience of bankers and industrialists, said he would favour adding capital to India's cash-starved asset reconstruction companies, which aim to buy distressed assets from banks

Turning to inflation, the RBI Governor said inflation figures which showed consumer inflation easing to a record low of 3.66 pecent in August were due to a favourable base effect. Without that, the consumer price index would likely have been in the mid-5 percent range, he said.

(Reporting by Himank Sharma; Editing by Clara Ferreira Marques)