Taking a tough stance over the issue of bad loans, RBI Governor Urjit Patel today said banks will have to deal with such loans themselves. He said that RBI will no longer show any leniency in such cases and banks would have to function strictly as per the regulatory norms related to managing bad loans. However, Patel promised that RBI will continue to work on finding appropriate solutions so that credit flow can be improved and problems related to troubled loans could be resolved.
Announcing his decisions to the media, Patel said, “Creeping forbearance in the treatment of bank losses is untenable and costly for the rest of the economy.” He also said that RBI will help banks to improve their weak balance sheets and manage their stressed assets. It may be recalled that the earlier practice was to simply brush aside the bad loans. However, this is set to change with the new plans announced by RBI. Currently, many banks in India are struggling with bad loans, something that is affecting their revenue and profitability.