Fight against NPAs: RBI to set up task force to improve loan quality

The Reserve Bank of India on Wednesday said it will constitute a task force to suggest ways of tracking the quality of credit in a better manner as Indian lenders battle mounting bad loans.

“To improve transparency in the credit markets and to facilitate early intervention as well as countercyclical provisioning, RBI has decided to put in place a high level task force comprising of experts and relevant stakeholders,” said Viral Acharya, Deputy Governor of RBI in the post monetary policy press conference. "This task force will evaluate the existing public and private infrastructure for credit information, assess any data gaps, study the best international practices and provide a road map for development of a comprehensive near real time public registry for India."

The roadmap will include the priority areas for developing a transparent, comprehensive and near-real-time registry.

The regulator has already created a Central Repository of Information on Large Credits to track large exposures. It also has a comprehensive Basic Statistical Return database with granular account-level information on credit.

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The RBI’s move comes after the central bank, under fresh powers granted through an amendment in law, identified 12 large stressed companies for insolvency action. They account for a quarter of Rs 7.7 lakh crore bad loans on the books on Indian lenders.

At present, credit information companies have been offering limited reports to lenders by segregating the information into separate modules. To address this, RBI directed such companies to incorporate all the credit information available in all modules of their database to all lenders, to reduce information asymmetry between borrowers and lenders.

In other regulatory policies, the RBI said it will ease liquidity coverage ratio guidelines by allowing banks incorporated in India to classify any reserves held by banks incorporated in India with a foreign central bank, in excess of the reserve requirement in the host country, as a high quality liquid asset.

Further, it has finalised the circular to operationalise the scheme of simplified hedging facility, which was first announced by the RBI in August 2016 followed by the draft scheme released in April this year.

The scheme aims to simplify the process for hedging exchange rate risk by reducing documentation requirements and avoiding prescriptive stipulations regarding products, purpose and hedging flexibility. It is also expected to encourage a more dynamic and efficient hedging culture which is lacking today.

The central bank also said that it will review the way it conducts surveys prior to the monetary policy announcement as per the recommendations of a technical advisory committee. The regulator conducts two such surveys – inflation expectation survey of households and consumer confidence survey.

Efforts are being undertaken to expand the coverage of IESH (inflation survey) to rural and semi-urban areas. In the case of CCS (consumer survey), the coverage will be increased from six cities to 13 cities, the RBI said.