RBI to be firm but pragmatic in tackling banks' non-performing loans

MUMBAI (Reuters) - The Reserve Bank of India (RBI) will be firm yet pragmatic in tackling the bad loans of commercial lenders, Governor Urjit Patel said on Tuesday, adding that more work was needed to resolve the issue of stressed assets.

Bad loans at banks have doubled in the past year after a clean-up ordered by the central bank under Patel's predecessor, Raghuram Rajan, last November.

Investors feted Rajan's efforts to chip away at a mountain of bad debt in India's financial system, but critics say an excessive focus on asset quality scared banks from lending and is partly why credit growth hit a near two-decade low.

"The non-performing assets situation is an important issue for the RBI in India," Patel, a former central bank deputy who succeeded Rajan last month, told a news conference after presiding over his first monetary policy review, in which a panel delivered a surprise 25 basis point cut in the key rate.

"We will deal with the situation with firmness but also with pragmatism, so that the economy does not feel any lack of credit to support growth."

The RBI was working with the banks and the government to resolve the issue of non-performing assets.

"The identification, the recording and reporting of this particular subject has been done satisfactorily. But the resolution, which is the fourth leg, is something that we need to work on more," he said.

(Reporting by Devidutta Tripathy; Editing by Clarence Fernandez)