Reserve Bank of India’s (RBI’s) deputy governor Viral Acharya has said that the cleaning of banks' balance sheet is the 'number one priority' for the central bank. Acharya when asked if cleaning of books of the banks takes precedence over rate cut by the RBI, said that it is 'certainly our number one priority.'
The statement follows the minutes of June meeting of the Monetary Policy Committee where Acharya maintained tolerance for a slightly higher rate of interest justified to ensure that banks “do not find relatively low the hurdle rate for evergreening (perennial extension) of bad loans”. Acharya had said that “What is required for monetary policy to do its job better is to address the stress on bank (and highly indebted borrower) balance sheets”.
Speaking at the Delhi Economics Conclave, Acharya said the note ban has changed the perspective of some sections of the society towards black money. Talking about demonetisation said that it has changed the perspective of some section of society towards the black money and preference for financial products are on the rise post that.
Last month, the RBI decided to refer 12 NPA accounts, which account for 25% of the bad loans in the banking system, for resolution under the Insolvency and Bankruptcy Code (IBC). The gross NPAs of the public sector banks were more than Rs 6.41 lakh crore at March-end.