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Subhash Chandra Garg, Secretary, Department of Economic Affairs, said the rupee, which had breached 70 to a dollar recently, is likely to stabilise around 68-69 levels soon.
The Indian currency has depreciated by around 6.7 per cent against the US dollar since the beginning of this fiscal. On Thursday, rupee touched an all-time low of 70.39-40 before closing at a record low of 70.16 against the greenback. “This breaching of 70 [mark] was on account of external factors largely on what happened in Turkey. Our fundamental equation for the trade has not changed. Oil prices have not gone up. Therefore, the demand-supply situation for dollar in the Indian economy has not altered. Our perception is that very soon it will stabilise and it might go back to 68-69 levels,” he said.
He added that public sector banks are likely to come out of the Prompt Corrective Action (PCA) framework and turn “profitable” in the next one-to-two years. As many as 11 out of the 21 state-owned banks are currently under the Reserve Bank of India’s PCA framework for breach of certain regulatory thresholds, including capital to risk weighted assets ratio, asset quality (net non-performing assets) and profitability (return on assets). “The provisions for stressed assets has already been made and no new large NPA generations are happening. The IBC (Insolvency and Bankruptcy Code) process is also helping in resolution of NPAs. So the worst is behind us and we can look for a healthy banking system moving forward,” Garg said at an interactive session organised by the Merchants’ Chamber of Commerce .
It is to be noted that the 11 banks that are under PCA are restricted from dividend distribution, branch expansion (both domestic and overseas), and increasing the size of the loan book, and are imposed with higher provisions, depending on the level of risk thresholds breached.
Additional restrictions
These apart, some of the banks such as Dena Bank and Allahabad Bank, are also facing ‘additional restrictions’ in the form of curb on expansion of risk-weighted assets and exposure to unrated and high-risk advances.
However, according to Garg, things should “turn better”, with an improvement in profitability.
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