Panel questions Reserve Bank of India on failure to take preemptive action against bad loans

RBIBy Accommodation Times News Service


The RBI has been questioned by a parliamentary committee for failing to take a stern action in checking bad loans in the banking sector Operandi, before the undertaking of Asset Quality Review in December in the year 2015. According to the report of the Standing Committee on Finance, the RBI needs to check out as to why the early signals of stressed accounts were not taken into account before the Asset Quality Review.

The report was taken into consideration by the committee headed by former union minister M Veerappa Moily, on August 27, 2018, and is likely to be tabled in the parliament in the coming winter session. The committee also includes former prime minister Manmohan Singh asked RBI about the reasons of ever-greening of stressed accounts, through restructuring its schemes, according to a source.

The report highlighted the issue of rising non-performing assets (NPAs) or bad loans and termed it as a legacy issue. The report also suggested that the role of the RBI has not been up to the mark. NPAs in public sector banks (PSBs) increased by about Rs 6.2 lakh crores, between March 2015 and March 2018. This scenario led to the substantial provisioning of Rs 5.1 lakh crores, sources said quoting the report, according to an agency.

The report also cleared the issue of low credit GDP ratio in India. As compared to 208.7% for China, 170.5 per cent for the UK and 152.2 per cent for the USA, India was 54.5 per cent as on December 2017.

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