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New RBI Governor Shaktikanta Das completes consultations with state-run banks

Shaktikanta Das further said he will meet representatives of private sector banks and cooperative banks next week to discuss issues and concerns.

Reported by: PTI, Mumbai [ Published on: December 20, 2018 21:31 IST ]

Shaktikanta Das

New RBI Governor Shaktikanta Das on Thursday said that he has completed his consultations with heads of state-run banks.

Das, who had earlier served in the government as Economic Affairs Secretary, took charge at the Reserve Bank of India (RBI) last week almost immediately after the abrupt resignation of Urjit Patel as the RBI Governor, a rare phenomenon in the banking world.

“Meetings with public sector banks completed. Shall meet representatives of private sector banks and cooperative banks next week,” Das said in a tweet. 

Shaktikanta Das further said he will meet representatives of private sector banks and cooperative banks next week to discuss issues and concerns.

As part of the consultative process, Das finished meeting with the public sector lender on Wednesday.

It is believed that heads of state-owned bankers discuss the issues related to relaxing the prompt corrective action (PCA) framework, liquidity and credit flows to MSMEs.

Of the 21 state-owned banks, as many as 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.

These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, Uco Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

In the first meeting last Wednesday, the bankers had sought some easing in the one-day default norms announced by the RBI through the February 12 circular, which nullified all other debt resolution mechanisms. 

Briefing media after taking charge, Das had said that consultations with stakeholders have become fundamental to the central bank’s functioning in view of the complexity of modern day decision-making and that he would start this process with meeting the heads of public sector banks (PSBs). 

Patel’s resignation followed the most significant crisis in government-RBI relations provoked by the liquidity crunch in the economy.

The government’s “differences” with the RBI centres on four issues - the former wanted liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, relaxing the prompt corrective action (PCA) rules for banks struggling with accumulated non-performing assets (NPAs or bad loans) that have reached the staggering level of over Rs 12 lakh crore, and support for MSMEs.

Earlier on Thursday, the government presented in the Lok Sabha the second Supplementary Demands for Grants for 2018-19 for gross additional expenditure of Rs 85,948.86 crore which includes Rs 41,000 crore for recapitalisation of the PSBs that have been hit hard by NPAs.

Currently, 11 banks with high bad debts are under the PCA framework that prohibits them from further lending. On the insistence of the Central government, the RBI’s Board for Financial Supervision is expected to meet soon.

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