Eleven state-owned banks will have to wait for about a month before knowing which of them will have lending curbs eased after a Reserve Bank of India (RBI) panel reviews their December quarter results, an official with direct knowledge of matter told Reuters on Thursday.
The government of Prime Minister Narendra Modi has been pressuring central bank to ease curbs on at least some of banks in an attempt to boost lending and economy ahead of a general election due to be held by May.The RBI's Board for Financial Supervision (BFS), chaired by central bank's new Governor Shaktikanta Das, met on Thursday and looked at estimates for financial performance of banks in October-December quarter.Based on those estimates, about three to four of these banks - which in recent years were targeted by RBI for tough lending restrictions because of a surge in bad loans, capital depletion and mounting losses - are likely to have those curbs eased, official said.However, panel will wait to examine audited results of banks, before making a final decision, source said.
The results are due by end of month but it is unclear when next panel meeting will be.The government has infused capital in some of banks to help them to adhere to central bank's capital ratios.However, panel would like to be sure which of banks will be able to maintain minimum capital ratios under scenarios such as a delay in recovery of bad loans in bankruptcy cases, official said."Every bank has given an estimate of their recovery plan to RBI.
We need to be sure that banks are following that plan and should be compliant with PCA (Prompt Corrective Action) norms by March end on capital and bad loan parameters."There are 21 listed state-run banks in country that provide about two-third of total loans in economy.
With nearly half of them under a PCA plan and rest cautious due to a record $150 billion in bad debt, government is keen curbs be relaxed to boost their ability to lend.After losing power in three key states last month, PM Modi's government is anxious to woo voters especially farmers and small businesses that were hit hard by a high-value currency note ban in late 2016 and introduction of a goods and services tax in mid-2017.However, RBI was reluctant to ease curbs, triggering a bitter public war of words between government and central bank that ended with former governor Urjit Patel resigning last month, citing personal reasons.