Bad loans cause for concern, says RBI

Reserve Bank of India Deputy Governor R Gandhi on Saturday expressed concern over bad loans and said banks should strengthen their internal credit appraisal systems to minimise the risk of default.

"The final (NPA) figure for March 2014 is yet to be known; while some may view this ratio as reasonable, given the economic conditions prevalent in the country and elsewhere, the total stressed assets in the banking system (including restructured standard assets) as at December 2013 was 10.13 per cent of the gross advances of the banks, which is a cause of concern for the Reserve Bank," he said.

However, he said early indications are that the figures for the fourth quarter are better than the third quarter. The gross NPAs or bad loans of the domestic banking system was 4.4 per cent of gross advances, he said at an event organised by Assocham here.

To minimise the risk of default, he said, "There is a growing need for banks to strengthen their internal credit appraisal system.”