RCEP offer 'was not as much as our aspirations', says FM Sitharaman

Union Finance Minister Nirmala Sitharaman said on Saturday that India did not join the Regional Comprehensive Economic Partnership (RCEP) as the offer “was not as much as our aspirations.”

The RCEP negotiations were launched by ASEAN leaders and six other countries during the 21st ASEAN Summit in Phnom Penh (Cambodia) in November 2012. The objective of launching RCEP negotiations was to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN member-states and their FTA partners.

She also said that she held discussions with credit rating agencies on their methodology to assess risk, in the backdrop of the failure of firms which had been rated well by these agencies. Delivering the sixth G. Ramachandran Memorial Lecture, organised by the Southern India Chamber of Commerce and Industry, she said, “I met up with a few of the credit rating agencies to understand the way in which they rate are consistent with what is happening in the economy.”

“Without taking any name, I would only highlight that an AAA-rated institution collapsed in a week after the rating. So, do you really take the rating as just an indicator or just a broad advisory or do you take that as a holy book and say that their rating is really good and they can be offered loan as much as they want?” she said.

Many such decisions, where the rating was good, ended up with people wondering why the company failed.

Speaking about the non-performing asset (NPA) crisis, she said most banks are out of prompt corrective action (PCA) now. They are going through a churn on how to assess risk and how best they can rate asset quality so that their functioning will be smoother. 

The government is also discussing the legislative changes or amendments the government needs to undertake to empower the RBI.

She also said banks should assess their strengths and weaknesses before planning to scale up of operations.

“I take the name of the Reserve Bank of India (RBI) here, particulalry in the context of the Punjab Maharashtra Cooperative Bank (PMC Bank). There had been several questions in the context of PMC Bank and earlier in the context of IL&FS collapse. The RBI is clearly looking at a lot, introspecting a lot, and making sure that there is a need for measures  within the RBI to strengthen supervisory and regulatory roles,” she said.

She added, “Institutions like banks should understand their core strengths and offer benefits to people like providing value-added features like phone banking facilities or rolling out chat bots to serve customers and should not take up unnecessary scaling up of operations.”

“Scaling up (of operations in banks) is becoming like a disease. Today, I am in this state and in six states. I am planning to expand presence across the country. Whether it will add to my core or make it weak, that is the assessment the banks should do,” she said.