RBI conducting independent assessment of true NPA picture: Governor Shaktikanta Das – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/policy/rbi-conducting-independent-assessment-of-true-npa-picture-governor-shaktikanta-das/articleshow/80706147.cmsSynopsis

The Economic Survey had last week called for another round of asset quality review when the Covid related forbearance is lifted. The survey stated that it was important for the Reserve Bank of India to do a complete clean-up exercise of bank balance sheets after granting every regulatory forbearance.

Mumbai: The Reserve Bank of India is conducting an independent assessment of true state of non-performing loans at banks and non-bank lender’s, Governor Shaktikanta Das said on Friday.

Responding to a question on whether a asset quality review (AQR) was imperative at this juncture, Das said the regulator’s supervisory process was already conducting a AQR like assessment.

“As far as banks are concerned, we are doing a deep dive and making our own assessment of the true state of NPAs in each of these banks and we have a sense of the overall situation. We are exactly doing what an AQR needs to do and that is already happening as part of our supervision,” Das said.

He added that a similar exercise was also ongoing with regard to non-bank financial institutions.

“In the last two years we have deepened our supervision,” Das said. “In the context of NBFCs I had said two years ago, that short of announcing an AQR our supervision is doing a deep dive to get a clear picture about the non-performing assets.”

The Economic Survey had last week called for another round of asset quality review when the Covid related forbearance is lifted. The survey stated that it was important for the Reserve Bank of India to do a complete clean-up exercise of bank balance sheets after granting every regulatory forbearance.

“A clean-up of bank balance sheets is necessary when the forbearance is discontinued,” the economic survey had suggested. “Given the problem of asymmetric information between the regulator and the banks, which gets accentuated during the forbearance regime, an AQR exercise must be conducted immediately after the forbearance is withdrawn.”

The RBI which announced its monetary policy on Friday also deferred the deadline for meeting the last tranche of capital conservation buffer (CCB) by another six months till October this year due to continuing stress on account of COVID-19 pandemic.

The capital conservation buffer ensures that banks have an additional layer of usable capital that can be drawn down when losses are incurred.

Besides, it was also decided to defer the implementation of Net Stable Funding Ratio (NSFR).
The NSFR, which reduces funding risk by requiring banks to fund their activities with sufficiently stable sources of funding over a time horizon of a year in order to mitigate the risk of future funding stress, was required to be introduced by banks from April 1, 2021.

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