Responding to a question on whether an asset quality review (AQR) was imperative at this juncture, Das said the regulator’s supervisory process was already conducting an AQR-like assessment.
“As far as banks are concerned, we are doing a deep dive and making our own assessment of the true state of NPAs in each of these banks and we have a sense of the overall situation. We are exactly doing what an AQR needs to do and that is already happening as part of our supervision,” Das said.
He added that a similar exercise was also ongoing with regard to non-bank financial institutions.
“In the last two years, we have deepened our supervision,” Das said. “In the context of NBFCs, I had said two years ago, that short of announcing an AQR, our supervision is doing a deep dive to get a clear picture about the non-performing assets.”
The Economic Survey had last week called for another round of asset quality review when the Covid-related forbearance is lifted. The Survey stated that it was important for the RBI to do a complete clean-up exercise of bank balance sheets after granting every regulatory forbearance.
“A clean-up of bank balance sheets is necessary when the forbearance is discontinued,” the Survey had suggested. “Given the problem of asymmetric information between the regulator and the banks, which gets accentuated during the forbearance regime, an AQR exercise must be conducted immediately after the forbearance is withdrawn.”
The RBI, which announced its monetary policy on Friday, also deferred the deadline for meeting the last tranche of capital conservation buffer (CCB) by another six months till October this year due to continuing stress on account of Covid-19 pandemic.
The capital conservation buffer ensures that banks have an additional layer of usable capital that can be drawn down when losses are incurred.
Besides, it was decided to defer the implementation of Net Stable Funding Ratio (NSFR), which was required to be introduced by banks from April 1, 2021.
