The Reserve Bank of India earlier relaxed the rules governing the core capital requirements of banks.
RBI further thinking to free up estimated Rs 30,000-35,000 crore for Public Sector Undertaking (PSU) banks and Rs 5,000 crore for private sector lenders.
Bank officers’ representative met with Reserve Bank of India governor Raghuram Rajan on Friday. Rajan told representatives that he would further look up to freeing up bank capital. With the ease, banks may further leeway in regulatory capital for public and private sector.
The representatives said that more than Rs 20,000 crore is locked in the balance sheets of PSU banks. Since the provisioning rule for non-performing assets (NPAs) are stricter than international requirements and this amount can be unlocked.
Rajan had told the officers' representatives that he would ask government to infuse capital into public sector banks at the earliest. The RBI governor also said that there will be no forbearance granted to banks, allowing them to continue to classify loans in default as standard loans.
He also pointed out that the RBI has already freed up regulatory capital by allowing lenders to revalue their real estate assets and recognize a portion of the gain for the purpose of capital adequacy.