Raghuram Rajan-headed FSDC panel expresses concern over bad loans

RajanRBI will shortly bring out draft guidelines to address issues relating to asset quality (Reuters)

The Sub Committee of the Financial Stability and Development Council (FSDC), headed by RBI Governor Raghuram Rajan, today expressed concern over the rising bad loans of banks.

The Reserve Bank will shortly bring out draft guidelines to address issues relating to asset quality, the central bank said after the 11th meeting of the FSDC Sub Committee.

"Other major issues taken up in the meeting included concerns relating to the deteriorating asset quality of banks," an RBI statement said.

The Sub Committee discussed the recent trends in the current account deficit and relative stability in the foreign exchange markets on account of measures initiated by the regulators and the government and also the improvement in the external environment, it added.

The FSDC was set up to strengthen and institutionalise the mechanism of financial stability and development.

Top 30 loan defaulters of public sector banks (PSBs) account for more than one-third of total gross non-performing assets of state-run lenders. The gross non-performing assets (GNPA) amount these accounts of public sector banks (PSBs) stood at Rs 72,174 crore, while for all banks it was Rs 91,667 crore at the end of September, 2013.

To improve the health of the financial sector and to improve asset quality of banks, besides preventing slippages, RBI from time to time issues instructions of banks.

The RBI statement further said the Sub Committee decided on a coordinated approach to the implementation of some non-legislative recommendations of the Financial Sector Legislative Reforms Council (FSLRC) within a defined timeframe.

Also, the desirability of developing a common repository of information on financial assets was discussed.

The RBI further said it was decided that the Inter Regulatory Technical Group, among other issues, would also explore implementation of such a repository in a progressive manner.

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