Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said there is a need for coordinated action between the centre and state governments to reduce taxes on petrol and diesel prices.
“There is a need for coordinated action between the centre and the states because there are inherent taxes levied by both,” the governor said, adding that calibrated reduction of taxes is important.
He, however, said both the centre and the state governments have their revenue pressures and they are required to spend high sums of money to enable the country and the people to come out of the COVID-19 pandemic stress.
“So the revenue requirement and the compulsion of the governments are fully understood. But having said that the impact on inflation also is something, which comes in from the fact that petrol and diesel prices do have an impact on the cost of manufacturing, production…,” the Governor said at an event organised by Bombay Chamber of Commerce.
On the central bank’s digital currency, Das said a lot of work is going on internally in the RBI and some broad guidelines and approach papers will be released on it soon.
The governor said RBI has certain concerns on crypto currencies and it has already been communicated to the government.
He said RBI is looking into strengthening the regulatory architecture for asset reconstruction companies (ARCs).
“(We are) refining and further upgrading the regulatory architecture in respect of the ARCs to ensure that they have a skin in the game, and they are very much in business is receiving a lot of attention from us,” Das said.
On setting up of ARC for non-performing asset (NPA) management, as announced in the Budget 2021, he said, “(in) no way will it jeopardise the activity of the existing ARCs”
The governor said there is growing realisation and awareness among banks to dealing with bad assets and they are proactively making provision in their books for stressed assets.
He said RBI has sharpened and deepened its supervisory methods and is doing deep dive into areas of banking which were not done earlier.
“We have a precise idea of build-up of stressed assets in banks and as soon as we see a sign of stress, we immediately enter into a discussion with the banks and proactively deal with the problems,” he said.
Das also asked public and private sector banks to improve their credit appraisal processes and take measures to stop ever-greening of loans.
He emphasised that the country’s financial sector currently is in a far much better place than it was earlier.
‘Proposed ARC will not ‘jeopardise’ existing players’
Mumbai,: The proposed asset reconstruction company (ARC) for management of non-performing assets (NPAs) announced in Budget 2021 will not ‘jeopardise’ the activities of existing players in the space, Reserve Bank Governor Shaktikanta Das said on Thursday.
While presenting the Union Budget 2021, Finance Minister Nirmala Sitharaman proposed to set up an asset reconstruction company and asset management company to consolidate and take over existing stressed debts and manage them.
“(In) no way will it (proposed ARC) jeopardise the activities of the existing ARCs. I think there is scope to have one more strong ARC…,” the governor said at an event organised by the Bombay Chamber of Commerce.
There are close to 28 asset reconstruction companies operating in the country at present.
Das said the proposal for setting up an ARC was given by public sector lenders to the government, which accepted it and announced it in the Budget.
The proposed entity will take over stressed assets from the books of public sector banks, and try to resolve them like any other ARCs are doing, he noted.
Das also said strengthening of regulatory architecture for existing ARCs is very much on the central bank’s agenda.
“Refining and further upgrading the regulatory architecture in respect of ARCs to ensure that they have a skin in the game and they are very much in business, is one aspect which is receiving a lot of attention from us,” he said, adding last year he had interacted with a group of ARCs but COVID-19 slowed progress on that front.
Speaking about stressed assets, the governor said there is growing awareness and realisation among banks in dealing with NPAs.
Even during the period when the Supreme Court ordered an asset classification standstill, banks proactively provisioned for stressed assets, he said.
The governor said RBI has also sharpened and deepened its supervisory methods and is now going to deep dive into areas of banking that were unexplored earlier.
With the help of the Central Repository of Information on Large Credits (CRILC) data coming in from banks on a regular basis, RBI has an idea on the quantum of stressed assets in various default buckets, he said.
“We have a precise idea of the build up of stressed assets in banks and as soon as we see a sign of stress, we immediately enter into a discussion with banks and proactively deal with the problems,” he emphasised.
The governor said apart from RBI’s supervisory and regulatory initiatives, the key to all issues is improving the governance in both public and private sector banks.
One area which requires focus of the bank management is on improving their credit appraisal skills and taking measures to see whether evergreening of loans, which was happening at some point, is suitable or not, Das said.
He also said the country’s financial sector currently is in a much better place than it was earlier.
