Holding corporates responsible for a major part of rising bad loans, RBI Deputy Governor K C Chakrabarty said on Wednesday that honest borrowers are paying for the sins of the 'inefficient.
'Again NPA is creation of the corporate sector, a major part of the NPA. You borrow from banks, you don't pay them in time. They becomes NPAs in the books of the banks. I pity bankers,' he said at an event organised by Assocham here.
'So why you are not able to pay back because your cost is more, income is less. You don't pay back the money. This can be possible only with the improvement in productivity and efficiency,' he said.
In a worsening trend of companies failing to meet their financial obligations, banks have seen a rise of up to 85 per cent in bad loans since the beginning of the current fiscal.
In the first two quarters of 2012-13, banks referred a record number of 74 CDR cases, involving a total debt amount of Rs 40,000 crore for restructuring.
Chakrabarty further said that if corporates are able to bring down the risk perception of banks, the interest rate could be reduced in their benefit.
'If you (corporates) can bring down risk in the economy, if the bank perceive that there is no risk, your interest will become 9-10 per cent,' he said, adding that 'if 5 per cent NPA becomes 1 per cent, then this can be done'.
'Today what is happening is that a person who is sincere, who is honest, he is paying money and the fellow who is inefficient, who is not able to do the business, is not paying the money. It becomes NPA. Its cost goes to the fellow who is paying the money,' he said.
'The bank would charge another 2 per cent from the fellow who is paying. We must look at this aspect little bit more dispassionately,' he added.
‘HIGH INTERESTS NOT SOLE REASON FOR SLOWDOWN’
The Reserve Bank of India (RBI) on Wednesday said that there is enough liquidity to take care of the lending activities of the banking system.
‘I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored,’ RBI Deputy Governor K C Chakrabarty said here.
To ease the liquidity situation, the RBI announced infusion of Rs 17,500 crore by reducing the cash reserve ratio (CRR) by 0.25 percentage points to 4.25 per cent last month. Reiterating that high interest rates were not solely responsible for slowdown in economic growth, Chakrabarty, however, said, high inflation has resulted in moderation in growth.'...what we are trying to say (is) that interest rate is not the only reason for the slowdown in growth. But inflation is definitely a reason for slowing down the growth,' he said.
'Yes, to that extent monetary policy is not able to control the inflation and not effective, it is responsible. We cannot say something wrong happening in the economy, we are not responsible. Collectively, we are all responsible,' he said. Asking banks not to shy away from giving loans to productive sectors, Chakrabarty said 'when NPAs are high your risk management system has to be improved, your credit appraisal system has to be improved.'
‘Because of NPA fear, banks need not stop lending but banks must improve their credit management capability for which there is enough scope, he said, adding, banks need to pay more attention to the credit needs of agriculture, SME and retail.
Asked if 7 per cent inflation has become new normal, the Reserve Bank of India deputy governor said, ‘...if our economy is getting integrated with the global economy, what is the global average inflation, our inflation cannot be much different from that.’
‘Markets are getting integrated, economies are getting integrated so you have to look for what is the average global inflation,' he said.
'If the average global inflation become 7 per cent, then it has to be 7 per cent inflation for us,’ he added.
'Again NPA is creation of the corporate sector, a major part of the NPA. You borrow from banks, you don't pay them in time. They becomes NPAs in the books of the banks. I pity bankers,' he said at an event organised by Assocham here.
'So why you are not able to pay back because your cost is more, income is less. You don't pay back the money. This can be possible only with the improvement in productivity and efficiency,' he said.
In a worsening trend of companies failing to meet their financial obligations, banks have seen a rise of up to 85 per cent in bad loans since the beginning of the current fiscal.
In the first two quarters of 2012-13, banks referred a record number of 74 CDR cases, involving a total debt amount of Rs 40,000 crore for restructuring.
Chakrabarty further said that if corporates are able to bring down the risk perception of banks, the interest rate could be reduced in their benefit.
'If you (corporates) can bring down risk in the economy, if the bank perceive that there is no risk, your interest will become 9-10 per cent,' he said, adding that 'if 5 per cent NPA becomes 1 per cent, then this can be done'.
'Today what is happening is that a person who is sincere, who is honest, he is paying money and the fellow who is inefficient, who is not able to do the business, is not paying the money. It becomes NPA. Its cost goes to the fellow who is paying the money,' he said.
'The bank would charge another 2 per cent from the fellow who is paying. We must look at this aspect little bit more dispassionately,' he added.
‘HIGH INTERESTS NOT SOLE REASON FOR SLOWDOWN’
The Reserve Bank of India (RBI) on Wednesday said that there is enough liquidity to take care of the lending activities of the banking system.
‘I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored,’ RBI Deputy Governor K C Chakrabarty said here.
To ease the liquidity situation, the RBI announced infusion of Rs 17,500 crore by reducing the cash reserve ratio (CRR) by 0.25 percentage points to 4.25 per cent last month. Reiterating that high interest rates were not solely responsible for slowdown in economic growth, Chakrabarty, however, said, high inflation has resulted in moderation in growth.'...what we are trying to say (is) that interest rate is not the only reason for the slowdown in growth. But inflation is definitely a reason for slowing down the growth,' he said.
'Yes, to that extent monetary policy is not able to control the inflation and not effective, it is responsible. We cannot say something wrong happening in the economy, we are not responsible. Collectively, we are all responsible,' he said. Asking banks not to shy away from giving loans to productive sectors, Chakrabarty said 'when NPAs are high your risk management system has to be improved, your credit appraisal system has to be improved.'
‘Because of NPA fear, banks need not stop lending but banks must improve their credit management capability for which there is enough scope, he said, adding, banks need to pay more attention to the credit needs of agriculture, SME and retail.
Asked if 7 per cent inflation has become new normal, the Reserve Bank of India deputy governor said, ‘...if our economy is getting integrated with the global economy, what is the global average inflation, our inflation cannot be much different from that.’
‘Markets are getting integrated, economies are getting integrated so you have to look for what is the average global inflation,' he said.
'If the average global inflation become 7 per cent, then it has to be 7 per cent inflation for us,’ he added.