Fitch satisfied with overall macroeconomic state: Mayaram

Representatives of global rating agency Fitch today discussed India's prospects with finance ministry officials, who said they were satisfied with the country's overall macroeconomic situation.

"I think they (representatives of Fitch) expressed satisfaction on the overall macroeconomic situation. In fact, they also assessed that from the last time they had come, the situation now is much better," Department of Economic Affairs Secretary Arvind Mayaram told reporters after the meeting.

"They have some concerns on the banks' non-performing assets (NPAs), which we explained is also a matter of concern to us.

"However, the NPAs, as assessed today, are not anywhere above the benchmark and therefore it is not something where there is certainly a red light would be," Mayaram added.

To contain rising bad loans, the Reserve Bank proposed a slew of measures on January 30.

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Arvind Mayaram

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The RBI's Framework for Revitalising Distressed Assets in the Economy outlines a plan that will incentivise early identification of problem cases, timely restructuring of accounts considered viable, and prompt steps by banks for recovery or sale of unviable accounts.

The development came amid fears that bad loans will reach a record high of about Rs 2.9 trillion by the end of this financial year, or 4.5 percent of total banking assets.

Meanwhile, finance ministry sources said Fitch Ratings also raised concerns about the fiscal deficit. "Ministry officials allayed concerns raised by Fitch onthe fiscal deficit front and reiterated the commitment to contain it at 4.8 percent of GDP," sources said. The meeting was also attended by other senior officials.

Sources said the ministry expressed confidence that the current account deficit (CAD) would be narrowed to below USD 50 billion, or less than 2.5 percent of GDP, in the current financial year, helped by curbs on gold imports and a range-bound rupee.

The CAD touched a record USD 88.2 billion, or 4.8 percent of GDP, in 2012-13, mainly due to high oil and gold imports. The CAD had also put pressure on the local currency.

The government had hiked customs duty on gold to 10 percent, resulting in imports of the metal falling sharply to 19.3 tonnes in November from 162 tonnes in May.

The finance ministry officials also asserted that investments would increase following approval of projects by the Cabinet Committee on Investment and the Project Monitoring Group.