Surgical restructuring of balance sheets required
Published: Feb 22, 2017
By TIOLCORP News Service
NEW DELHI, FEB 22, 2017: THE Reserve Bank of India Deputy Governor Viral Acharya while attending the Indian Banks' Association Banking Technology Conference on Tuesday said "some surgical restructuring should be undertaken to consolidate and strengthen bank balance-sheets so that private capital will come in at better valuations".
He further said that it might have to accept that it is best to let some banks shrink over time. Divestments should also be on the table. Historically, significant restructuring of stressed assets has almost always involved significant bank restructuring. Bad loans of PSU banks had shot up 56.4 per cent during the 12 months period ended December 2016. He added that there has to be an incentive provided to banks to restructure the stressed assets at a price that clears the market for these assets.
RBI Deputy Governor Viral Acharya admitted that several resolution mechanisms and frameworks have been offered by the RBI to banks to get it going, but the progress has been "painfully slow".
