| Log in
Reuters Photo Credit: Reuters

Economy roundup: FinMin may find common ground with RBI on bad loans

06 October, 2016

The finance ministry and the Reserve Bank of India (RBI) appear to be on the same page on the question of tackling the issue of bad loans, especially when it concerns state-owned banks.

A report by Mint on Thursday quoted finance secretary Ashok Lavasa as saying that it would be up to banks to see how to untangle their assets. “If they don’t take any decision to resolve these issues, neither the banks, nor the borrowers nor the project will get benefits. On the contrary, the three are suffering. So they will have to find practical ways out of this stagnation.

The other pragmatism that is being talked about is that it should not affect their lending to new projects. The new decisions of lending should go on the basis of merit,” the news report quoted Lavasa as saying. “So when RBI governor talks about a pragmatic approach, he is saying that yes, bad loans is an issue which needs to be resolved but it should not affect new credit off-take,” he said.

Lavasa’s comments come following RBI governor Urjit Patel’s remarks on Tuesday, where he said that the central bank will deal with the issue of the burgeoning Rs 6.3 trillion bad loan problem in a “firm and pragmatic” manner. This is a departure from the stance taken by Patel’s former boss and predecessor Raghuram Rajan who had set state owned banks a March 2017 deadline to deal with the issue.

A report in The Hindu Business Line said the RBI will be divested of its debt management role in two years from now. The report said the central government has made up its mind to set up an independent debt management agency, a precursor to which will be a Public Debt Management Cell that will be set up under the finance ministry’s Budget Division. This cell will be converted into a statutory authority in two years’ time, the report added.

Another report published by Mint said that market regulator, Securities and Exchange Board of India (SEBI) has found “reason enough to launch adjudication proceedings” against private bank Yes Bank Ltd in a case involving a $1 billion Qualified Institutional Placement (QIP) last month, that was aborted. Citing unnamed sources, the report said SEBI’s initial probe has found that Yes Bank violated norms of the listing obligations and disclosure rules before going ahead with the QIP.

Meanwhile, the festive season is witnessing consumer buying rebound across the board, after a lull during the last few quarters. A report in The Economic Times said both offline and online retailers have seen the biggest spike in discretionary spending in the last three years, with several leading chains reporting double-digit growth in sales. The report said retailers like Future Group, Lifestyle, Gap, Arrow and Puma reported 9-20% growth in sales over the year-ago period, while top consumer electronic brands like Samsung, LG, Panasonic and Videocon reported a 30-35% growth in brick-and mortar outlets.

Like this report? Sign up for our daily newsletter to get our top reports.


Leave Your Comment
India needs to create 'bad bank' quickly, says finance ministry aide Subramanian

India needs to create ‘bad bank’ quickly, says finance ministry aide Subramanian

Reuters 7 months ago
India’s finance ministry on Wednesday backed a call by the Reserve Bank of...
Will the new ordinance help banks clean up the bad-loan mess?

Will the new ordinance help banks clean up the bad-loan mess?

Aman Malik and Keshav Sunkara 4 months ago
When a new government takes office, it usually inherits a sizeable baggage from...
Equitas Holdings gets RBI nod to start small finance bank

Equitas Holdings gets RBI nod to start small finance bank

Anuradha Verma 1 year ago
The Reserve Bank of India (RBI) has given its final approval to the Chennai...
No Comments

Economy roundup: FinMin may find common ground with RBI on bad loans

Powered by WordPress.com VIP