India’s Central Bank To Make Decision On Easing Lending Curbs

The Reserve Bank of India (RBI) is in the process of reviewing the December quarterly results of state-owned banks to determine if lending restrictions will be eased, reported Reuters.

According to the report, 11 Indian state-owned banks will have to wait until February to find out whether RBI will follow through on urgings by Prime Minister Narendra Modi to ease the curbs on lending on at least some banks, in an effort to increase lending and boost the economy ahead of the general elections slated for May. RBI has been reluctant to ease the curbs, which has sparked a public fight between the government in India and the central bank. As Reuters noted, this resulted in former Governor Urjit Patel resigning.

RBI’s Board for Financial Supervision met on Thursday (Jan. 10) to look at the estimates for how the banks performed for the fourth quarter of 2018. The meeting was chaired by Central Bank Governor Shaktikanta Das, noted the report. An official told Reuters that three to four banks that were targeted by the Reserve Bank of India could have the curbs eased based on the estimates. The banks had come under fire in recent years because of an increase in bad loans, a depletion of capital and a growth in losses.

“Every bank has given an estimate of their recovery plan to the RBI. We need to be sure that banks are following that plan and should be compliant with the PCA (Prompt Corrective Action) norms by March end on capital and bad loan parameters,” Reuters quoted the official as saying.

Currently, there are 21 state-run banks in the country, providing two-thirds of the loans. With close to half of them under a plan that curbs lending, the government wants to ease those restrictions.