If you talk of a turnaround of the banking sector then yes, a turnaround has started.
Q. Please tell me briefly from a banker’s point of view how you look at the Indian economy. Has the turnaround started?
A. If you talk of a turnaround of the banking sector then yes, a turnaround has started. We see capital is coming to the banking industry wherever necessary. We are able to maintain the required regulatory capital, that is, the banking industry has enough capital to meet Basel III norms. But if we come to capital for growth there are problems. The big problem of the industry is its high level of non-performing assets (NPA). For NPA, particularly after the RBI’s February 12th circular, the restructured standard account of many banks have become NPA. Because they had come out of CDR as they were not earlier. Earlier many of them were good accounts. In our case we have sent two cases to NCLT. At the same time, we on our own sent some cases to NCLT. So, things are changing for the banking sector. Already two cases have been decided. We are hopeful that the other five to six cases will be decided in the coming quarters.
Q. Many big bankers think that for industry the worst is over. Whereas the RBI is now saying in its recent financial stability report that NPA will rise and capital adequacy ratio will fall in the coming financial year. Do you think these to be contradictory?
A. I am not saying these are contradictory. We cannot know what’s on the mind of the RBI. If more capital becomes NPA and whether it due to its more stringent rules we have to wait and see. In the February 12 circular, the one-day defaulter rule is also there. Under this new rule it is natural that more and more corporate NPA may come up.
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