The Reserve Bank of India top brass, led by newly appointed Governor Shaktikanta Das, gave a two-hour hearing to Mumbai-based public sector bank (PSB) chiefs on Thursday on a host of issues. These included relaxing the revised framework for resolution of stressed assets, tempering capital requirements, and reviewing guidelines on using lockable cassettes in ATMs.

This was Das’ first interaction with the heads of top state-owned banks after he took charge of the central bank on Wednesday. Bankers said the meeting was cordial, with the RBI management all ears to the issues flagged by them.

The chiefs of State Bank of India, Bank of India, Union Bank of India, Central Bank of India and Dena Bank were among those who attended the meeting. Punjab National Bank MD and CEO Sunil Mehta, too, was at the meeting, in his capacity as Indian Banks’ Association Chairman.

Deadline extension

The bankers underscored that the RBI’s prescription — that an account has to be resolved within 180 days in case of a default — is rather severe. They wanted the deadline extended.

“We told the Governor that if the RBI can give some comfort on the February 12 circular, it will be good for us. The Governor asked us to come back with suggestions,” said a banker.

Since the government is hard-pressed when it comes to pumping more capital into the PSBs, the bankers suggested that the capital adequacy ratio, which has been set at 9 per cent for Indian banks against the Basel III requirement of 8 per cent, be temporarily relaxed so that they can lend more.

“If the risk-weights are pared, the capital required to grant loans comes down. So, if we have to grow, we either have to get the capital or the risk-weight on loans has to come down,” explained another banker.

The risk-weight assigned to assets (loans/ investments), which is prescribed by the RBI, and the capital required to make the loans/investments are directly correlated. If a class of loans carries higher risk-weight, the banks will need to set aside more capital to grant them.

PSBs that have been placed under the prompt corrective action (PCA) have requested for a relaxation of the restrictions on their lending activity. If they are unable to lend, it makes their turnaround more difficult, they pointed out. Of the 21 PSBs, as many as 11 are under the PCA framework, which is meant to nurse them back to health.

Lockable cassettes in ATMs

On the issue of using lockable cassettes in ATM machines, the bankers told the RBI that implementing the directive will entail huge costs for banks.

The exercise would not only require an investment of about ₹6,800 crore, but also present operational difficulties, they said.

The RBI had earlier rejected banks’ pleas on this issue, prompting them to seek the Finance Ministry’s intervention. Following today’s meeting, the bankers are hopeful that the issue will be resolved.

Now all eyes are on the RBI’s central board meeting, scheduled for Friday.

In Urjit Patel’s regime, the regulator had objected, among other things, to more say for the central board in RBI’s affairs (saying that it can undermine its autonomy), relaxation in PCA norms for PSBs, and the opening a separate liquidity window for non-banking financial companies.

Friday’s board meeting is expected to take stock of the Micro, Small and Medium Enterprises (MSMEs) sector, which is under stress due to demonetisation and the implementation of GST, along with a host of other topics.

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