Rise in NPAs likely,but no systemic risk: RBI

RBI deputy governor Anand Sinha raised concerns over deteriorating asset quality of banks.

Reserve Bank of India (RBI) deputy governor Anand Sinha on Wednesday raised concerns over deteriorating asset quality of banks,but ruled out any systemic risk as of now.

There are concerns that there might be some rise in NPAs. But it is not a systemic concern as of now, Sinha said on the sidelines of Ficci-IBA summit,adding that there could be some sectoral risks going forward. The deputy governor also observed that the higher interest rates are exerting pressure on consumer demand.

I would not say we are particularly worried about the retail loan segment. But the retail segment is the one that is likely to feel the pressure, he said.

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Banks have been witnessing rising risks from small and medium enterprises (SMEs) and unsecured portfolios. There are rising risks … especially from the SMEs and the retail sector and that he may look at increasing in the tenor of the loan than increasing the EMIs, said Bhaskar Sen,chairman and managing director,United Bank of India.

On Tuesday,Diwakar Gupta,chief financial officer,State Bank of India had said the banks Rs 7,000 crore education loan has been witnessing pressure and the level of the stressed assets have reached 4 per cent of the exposure. Speaking on the impact of the Basel III on state-owned banks,Sinha said,The government will have to infuse

funds into the banks to ensure that they are adequately capitalised. The government has to maintain a 51 per cent stake and it will ensure that banks

get capital requirement for expansion. Basel III requires a high level of liquidity to be maintained through a pool of liquid assets. The definition of liquid assets is very stringent including the requirement that they should be freely available while our banks maintain a large pool of liquid assets from SLR requirement strictly speaking this would not qualify as liquid assets under Basel III, he observed.

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In central bank our dilemma is asking banks to maintain more liquid assets over and above SLR would put them in a competitively disadvantageous position. Therefore we are considering on what extent the SLR can be reckoned towards Basel III requirement for holding big assets or if there is any other way, he said.