The RBI has left key rates unchanged but hinted at some new rule to help the banking sector tide over the NPA crisis.

Speaking to Bloomberg TV India, Union Bank of India CMD Arun Tiwari said banks are now rebalancing their balance sheets.

RBI Governor Raghuram Rajan has asked banks to relook their books and wants a uniform NPA recognition across the board. Is it as simple as it sounds?

If I am suffering from some ailments and I go to a doctor, he can just tell me these are the ailments and this is the medicine. If I don’t take the medicine it is at my cost. So in a way the RBI Governor is right. They have flagged the issues. And if you have to be within the regulatory framework banks better abide by them. That is what we have been doing. I firmly believe that if the ailment is gangrene, amputate it. So I am absolutely on dot with the statement made by the RBI Governor.

Talking about the capital part of it, these are the times when we should be looking at conserving the capital and controlling our risk-weighted assets. I can vouch for Union Bank of India numbers. If we track only one number that is risk-weight assets, for scheduled commercial banks it is about 75 per cent, for peer group it is 79 per cent whereas for Union Bank of India it is 70 per cent. So we are rebalancing our balance sheet.

I am not saying that we should grow at 10-15 per cent. Look at the quality of the numbers which are embedded in the balance sheet and in your profit and loss account. I think one statement which was embedded in the long statement of the Governor is that there are certain other assets, which sit on our balance sheet and which are recognisable towards the capital within Basel-III. So, I think some guidelines will come up and perhaps this is what he was hinting at and maybe about the revaluation reserves, which we all have upfront discounted by 45 per cent and we have got headroom to adjust that.

Speaking about the Budget expectations, what are your views from the banking sector perspective?

When the economy picks up, the banking sector starts doing well. We all have been talking about delinquent assets sitting on the balance sheets of banks. The economy has not been doing well for the past two-three years and this is the end-result and there are reasons for it. I think the government has already been talking about the bankruptcy law. If they walk that talk in the next six months, I think that will be good enough.

The government has committed money for the recapitalisation of PSU banks. And once the economy picks up, there will be a lot of write back of the provisions, which we are making in our stressed asset portfolio. The one thing that is taken care of is the recapitalisation of the banks. Firstly, we should raise the amount. Secondly, the Budget may give some sops to the Additional Tier-I capital (AT1) bonds which will make it attractive for insurance companies and provident funds to invest.

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