<p>India’s central bank chief Shaktikanta Das called for stronger corporate governance at state-run lenders to make the country’s banking sector more efficient.</p>.<p>Describing the lack of strict governance as the “elephant in the room,” Das said this had led to elevated levels of non-performing assets, capital shortfalls, fraud and inadequate risk management.</p>.<p>“The role of independent boards in fostering a compliance culture by establishing the proper systems of control, audit and distinct reporting of business and risk management has been found wanting in some public-sector banks leading to build-up of NPAs,” Das told an audience in the western Indian city of Ahmedabad.</p>.<p>State-run lenders control about 60% of India’s banking industry. They are owned by the government, with the Reserve Bank of India having limited supervision and legal powers to bring about changes in management, unlike privately-owned ones over which is holds more sway. That creates an uneven playing field leading to question marks about the efficacy of central bank regulations over state-run institutions.</p>.<p>Read: Arcelor’s $5.9 Billion Purchase to Aid India Bad Loan Clean Up</p>.<p>India’s banking sector has the highest ratio of stressed assets in the world, with many bad loans to companies in sectors such as energy and steel. A crisis in shadow banking has also raised further concern that banks, which have 7% of their loans to non-banking finance companies, will face a fresh spate of debt defaults.</p>.<p>Das said that while the number of NPAs has declined recently, the provision coverage ratio has increased to 60.5% from 48.3% a year ago. The capital adequacy ratio in the banking system has also climbed to above the Basel requirements, he said.</p>
<p>India’s central bank chief Shaktikanta Das called for stronger corporate governance at state-run lenders to make the country’s banking sector more efficient.</p>.<p>Describing the lack of strict governance as the “elephant in the room,” Das said this had led to elevated levels of non-performing assets, capital shortfalls, fraud and inadequate risk management.</p>.<p>“The role of independent boards in fostering a compliance culture by establishing the proper systems of control, audit and distinct reporting of business and risk management has been found wanting in some public-sector banks leading to build-up of NPAs,” Das told an audience in the western Indian city of Ahmedabad.</p>.<p>State-run lenders control about 60% of India’s banking industry. They are owned by the government, with the Reserve Bank of India having limited supervision and legal powers to bring about changes in management, unlike privately-owned ones over which is holds more sway. That creates an uneven playing field leading to question marks about the efficacy of central bank regulations over state-run institutions.</p>.<p>Read: Arcelor’s $5.9 Billion Purchase to Aid India Bad Loan Clean Up</p>.<p>India’s banking sector has the highest ratio of stressed assets in the world, with many bad loans to companies in sectors such as energy and steel. A crisis in shadow banking has also raised further concern that banks, which have 7% of their loans to non-banking finance companies, will face a fresh spate of debt defaults.</p>.<p>Das said that while the number of NPAs has declined recently, the provision coverage ratio has increased to 60.5% from 48.3% a year ago. The capital adequacy ratio in the banking system has also climbed to above the Basel requirements, he said.</p>