RBI has taken a number of measures to strengthen co-operative banking system, he added.
The Reserve Bank of India (RBI) is “engaged with all stakeholders” of the Punjab and Maharashtra Cooperative (PMC) Bank for a workable solution, Governor Shaktikanta Das said on July 11.
"With regards to the Punjab and Maharashtra Cooperative (PMC) Bank the Reserve Bank of India (RBI) is engaged with all stakeholders to find a workable solution as losses are very high, eroding deposits by more than 50 percent," Das said. He was speaking at the 7th State Bank of India Banking and Economics conclave.
RBI has also tweaked its priority lending norms for urban cooperative banks (UCBs) to ensure they lend more to sectors for which they were intended to lend to, Das said, adding that “special efforts” are being made towards identifying early risks for UCBs.
“RBI has taken a number of measures to strengthen co-operative banking system. Yes Bank is one such example where RBI proactively acted. The reconstruction scheme was implemented quickly to safeguard depositors Interest and financial stability. Specialised handling of weak institutions helps us determine risks in a timely manner,” he added.
He pointed that the government has infused Rs 3.08 lakh crore of capital into public sector banks (PSBs) and that overall stressed assets have declined and capital position of banks has improved over last few years.
“The rising stress is obvious and possibilities of increasing vulnerability and rising non-performing assets (NPAs) is a given naturally. Thus, recapitalisation of public sector banks (PSBs) has become absolutely necessary,” he said.
Stating that the global financial crisis and the COVID-19 pandemic have dispelled the notion that tail risks to financial system will arise only once in a while, Das said that only meeting minimum capital requirement while necessary, is not a sufficient step.“Banks have to improve governance, sharpen risk management and raise capital on an anticipatory basis. Key takeaway is how banks and financial institutions respond to this challenge,” he noted.