Even as bad loans hit a record high, growing by over 35 per cent in the first three quarters of FY14 year-on-year, the senior most RBI Deputy Governor today said there is no systemic risks as of now, but called for improving the process of identifying stress on time.
Stating that banks have to change their credit appraisal process and policies, and should also try to come out of the problem soon, Deputy Governor K C Chakrabarty said: "NPAs are not a problem now but the process is a problem and we have initiated a lot of process (to check bad loans).
"We are very sure that banks have to take quick action about the existing stock of NPAs. They have to take some debt cuts, and they have to do it very quickly. And, if they do not do, then as a regulator, we will make their cost higher."
However, he was quick to add this was his personal view and not that of the RBI. The commercial banker-turned-central banker was speaking at an investor summit here.
He said the RBI is compelling banks to take suitable action on the bad asset front and at the same time suggesting them to improve their credit appraisal system.
Stating that there is no reason to worry too much about the banking system - considering the large untapped opportunities as only 10 per cent of the 124 crore people have access to bank credit - he said lenders have to look beyond serving only "this 10 per cent creamy layer."
On inflation, he said it has peaked and will now moderate going forward "but not because of the effort by the government and RBI, it is beyond their capacity. Inflation has become chronic but anyways we cannot have 10 per cent inflation and 5 per cent growth indefinitely."
"Inflation has peaked. It is starting to come down and my own assessment is that it will start going down and may be in one-and-a-half-year down the line it will reach the target of 5.5-6 per cent."
Headline inflation eased to eight month low of 5.05 per cent in January.
He said part of the problem with persistently high inflation is that "we have not been able to define inflation properly. Now at least that wisdom has come into the RBI in regard to inflation target.
