'RBI will provide banks time to restructure MSME loans'

Usha Thorat, deputy governor, the Reserve Bank of India (RBI), said on Friday that all the liquidity steps taken up by the central bank are to ensure that the productive sectors of the economy receive credit.

"All the efforts we have made is to ensure that the productive sectors of the economy obtain credit," said Thorat, adding that all the steps taken by the RBI, including the ones on Thursday, are intended for the same purpose. Thorat was speaking on the sidelines of the IBA-IDRBT workshop on open standards for financial inclusion in Mumbai.

She also said that the RBI will ensure that labour intensive sectors like micro, small and medium enterprises (MSMEs), housing and exports receive the necessary credit. "All the measures taken by the RBI, in terms of providing liquidity, on the CRR and repo rate cut, have ensured there is ample liquidity in the system," said Thorat. Speaking about the non-performing assets (NPAs), Thorat said that the central bank will provide the banks sometime to restructure their MSME loans, rather than relaxing the NPA norms.

"Monitoring of NPAs will take place. Banks will have to keep a watch on their credit quality," she noted. "Banks should be given time to restructure their MSME loans, rather than relaxing the NPA norms. While lending, banks need to ensure the credit quality also," Thorat said.

Thorat also noted that RBI sees some growth in credit, but still in process of reviewing banks.

"We are seeing some growth in the credit for the banking system. However, there is need to ensure adequate credit flows to priority sectors. We need to see how things pan out," said Thorat. Talking about financial inclusion, Thorat said there should be co-ordinated efforts between the banks and state governments so that the unbanked rural areas are brought into the banking territory. She also added that banks need to scale up their operations in rural areas with the use of no-frill accounts and business correspondent models.