Reserve Bank Governor Raghuram Rajan today said it is too early to declare victory over the high non-performing assets in the system, which will improve only with an uptick in growth expected during this fiscal.
"I think, the most immediate problem we have to confront is that of rising level of stressed assets in the banking system. Fortunately in the last quarter those levels of stressed assets tapered off or flattened out. But, it is too early to declare victory," he told reporters here after the central board meeting of the monetary authority.
Rajan, who has initiated a slew of measures, including asking banks to work together to spot and resolve asset stress early, said the remedy for this lies in "stronger governance actions" like clearing projects and growth numbers inching up faster.
"Growth bails out lot of past bad decisions. So I believe that as growth comes back, and I fully expect that growth will be stronger over the course of the year, that some of the bad assets will turn back performing," he said.
It can be noted that lenders, especially the public sector banks, are saddled with a high amount of asset stress due to a slew of problems including economic gloom, projects not getting cleared by the executive and also some judicial interventions like the ban on mining.
As of March 2014, total NAPs stood at a high 4.4 per cent for the system, with multiple analysts fearing it will go up further.
Commenting on the early detection and redressal of NPAs which incentivises banks to detect an issue early and also includes penalties for being late, Rajan said it is still early days for the system but bankers have informed him that promoters are finding it difficult to con the lenders now.
Meanwhile, even though he declined to offer a reaction on the Budget presented today saying he had not read it, Rajan said the central bank will be working in close coordination with the government on aspects like creating a new monetary policy framework which was announced by Finance Minister Arun Jaitley.
On the movement of the rupee and the level where the RBI would like the currency to be, Rajan said the rupee is holding on to a level currently, and RBI will not be "too interventional" in the market.
He, however, added that it will work towards reducing volatility in the currency