Re-structuring of banking sector needed to resolve problem of NPAs: VV Acharya

Newly-appointed Reserve Bank deputy governor Viral V Acharya has called for some urgent steps to resolve Non-Performing Assets (NPAs) of banks. Addressing a function in Mumbai, he said none of the piece-by-piece approach offered so far has worked simply because of many discretions given to banks and their skewed incentive system.
Mr Acharya said, even the December 2015 asset quality review (AQR) by the central bank has not helped resolve the issue, except in turning



public attentions to the same. Asking bankers to take NPA resolution with a certain sense of urgency, he said timely resolution of NPAs is essential to restore corporate investment and create jobs.
Mr Acharya also suggested that using a part of the RBI reserves to recapitalise state-run banks may not be a good idea. Suggesting a new model for dealing with the threats of capital constraints and rising NPAs, he said a restructuring of the banking sector is needed.