RBI Governor Raghuram Rajan has paused on interest rates but delved deep into the problems of the economy and the banking sector in particular at the monetary policy review.

Speaking to Bloomberg TV India, UCO Bank CMD RK Takkar said the RBI will be waiting till the Budget to take a call in the next review. Banks will require massive capital infusion and the Budget should offer some tax relief to Additional Tier-I bonds, he said.

RBI Governor Raghuram Rajan has articulated the economic scenario and the monetary stance. What did you make of the commentary there?

I think the monetary policy has been on the expected lines. The RBI Governor has expressed concerns over various issues, whether it is world economy or the Indian economy, like the fiscal deficit scenario. I think he will be waiting till the Budget to take a call in the next review. As far as we are concerned, there is a slowdown in the exports as well as in the agriculture and manufacturing segment. Therefore, the Budget has to offer some boost to the economy. The Governor has rightly pointed to the 7th Pay Commission, which I think may help demand to pick up, especially in real estate. That can be a good opening for the economy to pick up. We are hopeful that after the Budget, we will see something happening and that will give a boost to the economy.

As a banker, what’s your view on the entire NPA scenario? Will the situation improve as we step into the new fiscal or is there a need for bigger dose of capital infusion to write off the bad loans? What’s your wish-list for the Budget?

The bad debts or NPAs have been a cause for concern. Basically, what has happened is over a period of time these loan advances were made. Because of adverse conditions, economic stress and other reasons, these loans have become NPAs. The concern within the banking system is that we require more capital. Although the government has committed additional capital infusion — ₹20,000 crore has been provided and the balance ₹5,000 crore is expected in the remaining part of this financial year. And another ₹25,000 crore will be infused in the next fiscal year. But banks will require a lot more capital. And, there have to be good markets for AT1 bonds, which the banks can issue to mop up additional capital. So if the Budget offers some tax relief for such bonds, it would help in a great way. Banks are going for cleaning of balance sheets. And we are hopeful as the economy picks up, banks will be in a better position.

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