Besides Consolidation, Government Should Look At Reducing PSU Bank Stake: HR Khan
Healthy stock markets bolster the case for banks to explore other options to raise capital from the market.
The government should consider dilution of its stake in public sector banks besides looking to consolidate them, according to former Reserve Bank of India (RBI) Deputy Governor Harun Rashid Khan.
Healthy stock market performance bolsters the case for banks to explore other options to raise capital from the market, Khan told BloombergQuint at the sidelines of NABARD’s 36th Foundation Day celebrations in New Delhi.
I think when stock markets are doing well, we should also look to support them (from other resources) rather than (being dependent) on government.HR Khan, Former Deputy Governor, RBI
Introducing recapitalisation bonds could be one of the best ways for non-performing asset (NPA) resolution as it won't have any fiscal impact, Khan added.
Tackling Bad Loans
Welcoming the RBI’s latest measure to tackle bad loans by referring 12 large corporate accounts for insolvency and bankruptcy procedure, Khan said after initial confusion things would settle down, “and it’s good that certain legal precedents are established... and subsequent cases will become easier to deal with.”
Recently Essar Steel Ltd. moved the Gujarat High Court against insolvency cases filed against it by lead lender State Bank of India and foreign bank Standard Chartered, calling the central bank’s action “hostile, arbitrary and unreasonable”. For the moment, proceedings in the Essar Steel matter at the National Company Law Tribunal, where these insolvency cases are being heard, stands stalled.
Alternative To Farm Loan Waivers
The alternative to farm loan waivers, Khan said, would be to tap more resources, such as foreign funding and technology to help farmers providing seed, water and electricity, he said.
“We cannot every year go on waiving loans of farmers, and disturb the credit culture, we have to look into structural issues,” he added.