Rajan took many steps to put banking system in right direction: President

Just retired RBI Governor Raghuram Rajan's clean-up of more than USD 100 billion of stressed assets on the books of banks today came in for praise from President Pranab Mukherjee who felt rising NPAs are not a desirable situation.

 

"Of course more than often you listen to NPAs of the banking system, which is no doubt a matter of concern. And Governor of RBI who has just retired, Mr Rajan, took many appropriate steps to put the system in the right direction," he said at the centenary celebrations of Karur Vysya Bank here.

 

The stressed advances to gross advances of scheduled commercial banks have increased from 10.90 percent in March 2015 to 11.40 percent in March 2016, he said, adding the aggregate provisions for NPAs rose from ₹73,887 crore to ₹1,70,630 crore.

 

Also, net profits of the banks have come down from ₹79,465 crore during March 2015 to ₹32,285 crore in March 2016, he said.

 

Rising NPAs is "not a desirable situation," he said, adding those resources must be available for commercial disbursement.

 

Rajan, who completed his three-year term as Governor of the Reserve Bank of India on September 4, had forced banks to recognise the real state of their bad loans.

 

This culminated in a six-month asset-quality review that led to banks reporting a surge in bad debt disclosures and higher losses this year.

 

Mukherjee said Indian economy and its banking system had done reasonably well considering "indiscretion of a private bank (abroad) could create such an international financial crisis from which world is yet to recover."

 

Forecasts of the IMF and World Bank are revised and re- revised year after year because the world economy is hit by one after another crisis, and overall performance of major economies of the world are not so bright and prosperous, he said.

 

"Everybody at that point of time pointed out that when the major banking institutions in international arena were suffering, Indian banking system stood firmly and solidly because of its prudent management not indulging in some profligation," pointed President.

 

I am happy to note that because of the basic foundations, and strength of our macroeconomic indices, Indian economy is doing reasonably well," he added.