RBI says 'watchful' of banks' bad loans levels

Says while NPAs in April-June quarter stable, they are still not back to normal levels

Reserve Bank of India Deputy Governor S S Mundra said the latest April-June earnings from state-owned lenders showed "stability" in terms of non-performing assets (NPAs), but added the central bank would remain "watchful."

India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic expansion hurt companies' abilities to service debt.

"I think the results which have come, on the NPA front, there looks like some kind of stability now," Mundra told Reuters on the sidelines of a conference on Wednesday.

"It is not back to the absolutely normal position," he added. "It would need a constant watch from us."