RBI concerned over high current account deficit
Chennai: Voicing concern over high Current Account Deficit, Reserve Bank Governor D Subbarao Thursday said steps should be taken to reduce it to sustainable levels.
"Well, concern is a very broad question. Yes, in a sense, we are concerned. Because, the sustainable CAD for the economy as several people have said, including the Reserve Bank, is 2.5 percent.
"Current Acount Deficit a year before last year was 4.2 percent, last year it was 4.8 percent. It is a matter of concern..", Subbarao told reporters here.
"We should be working towards reducing the Current Account Deficit to sustainable levels", he said.
Asked about the monsoon conditions, he said the Reserve Bank also watches it.
"Because, our economic conditions, particularly, the economic conditions of poorer section of our population are determined by the monsoon. Because, that determines the agriculture output and the rural economy", Subbarao said.
Commenting on the circulation of counterfeit currencies, Reserve Bank Deputy Governor, K C Chakraborty said it was a problem and the Central Bank was encouraging the banks to help identify such fake notes.
"Partly, this is a national problem. We are also working with the security agencies to stop this menace. We have said in our guidelines, we are encouraging the banks even one or two currency note comes, FIR need not be lodged.
"We are trying to make the life of the people more simpler. But what do we encourage and what we request the media that you must save the people. Whenever they are in possession of a fake note, they must surrender it to the nearest bank. It is much easier. We will be able to tackle that problem, much more, you see, in a competent matter.", he said.
Asked about the increasing non-performing assets of the banks, Subbarao said,"Non-performing assets of banks, have been going up for the last two years. Only between December 2012 and March 2013, we have seen some marginal decline".
"It is not clear, at this time whether the marginal decline is a trend or whether it is just a temporary blip. We have to wait for next quarter data. In addition to NPAs, we also have to reckon with the restructured assets, which in spite of being restructured are treated as standard assets", he said.
"Together NPAs and restructured assets are increasing and are quite sizeable. It is a matter of growing concern. However, as we have said in the financial stability report, our banks are well capitalised. They would be able to withstand substantial "shocks" to the system.", he said.
Nevertheless, the Reserve Bank and government have taken all action necessary to ensure that NPAs come down as soon as possible, Subbarao added.