Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday said that banks should not have majority ownership in any stressed asset fund that the government contemplates to establish together with banks and investors.
Governor’s remarks have come on the heels of Finance Minister Arun Jaitely’s statement on government plan of setting up stressed asset funds in collaboration with banks that could provide equity to stressed companies.
Indian Banks Association (IBA), last month had sought RBI’s views on a bank-sponsored stressed asset fund.
“Majority ownership by banks of any such funds is probably not wise. Perhaps some form of minority ownership with a number of other players coming in addition to the government to provide capacity, especially for managing the stressed assets, would be appropriate,” said the governor.
There is an urgent need of a solution to stressed assets due to the increase in bad loans on bank books after the RBI conducted an asset quality review in 2015.