Rajan warns state-run banks against year-end window-dressing
Quotes

Rajan warns state-run banks against year-end window-dressing

Last Updated: Tuesday, April 01, 2014, 14:21
 
 Comment 0
 
Rajan warns state-run banks against year-end window-dressing
Mumbai: The practice of "window dressing" by state-run banks towards the end of every financial year to meet performance objectives came in for sharp criticism from Governor Raghuram Rajan Tuesday, who said the Reserve Bank will not "bail out" lenders for their bad policies in future.

The year-end should not be a time for any spectacular changes in the banking system and must pass smoothly, Rajan told reporters after announcing the bi-monthly monetary policy, which left key policy rates unchanged.

"I don't think the RBI should be in the business of bailing out the banking system with infusion of liquidity when the banking system is creating its own problems," he said.

"What happens towards the end of the year is banks are trying to build a certain kind of balance sheet for a variety of reasons," he said, adding that some lenders reduce their risk-weighted assets to lower their capital requirements, while some state-run banks increase their assets in order to meet performance targets set by the government.
Rajan said such adjustments by banks affect various market segments and cited volatility in certificates of deposit starting even from February, which had to be curtailed by the Reserve Bank by improving long-term liquidity through long-term repo.

Rajan, who was scheduled to meet bankers after the press conference, said he will discuss the issue with the lenders with a focus on liquidity distortions towards the year end.

"(We should) not come to this pass where banks aren't lending to each other to maintain the kind of balance sheets they want. The year end should not be a time for anything special to happen, it should be smooth," he said.



PTI

First Published: Tuesday, April 01, 2014, 14:18


Comments


comments powered by Disqus
Honda Mobilio MPV
Honda Mobilio MPV
BRICS Annual Summit 2014
BRICS Annual Summit 2014
Tata Zest Standout Features: In Pics
Tata Zest Standout Features: In Pics
New car launches in July
New car launches in July
Tata Zest first drive review: In pics
Tata Zest first drive review: In pics

Web Wrap
Contact Us : Privacy Policy : Legal Disclaimer
Copyright © Zee Media Corporation Ltd. All rights reserved