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RBI Governor Mr.Shaktikanta Das yells for compressed governance : Indian states-run banks

Elaborating the lack of stringent rules of laws as the ” an elephant in the room”, he urged this had led to all sorts of ills to the Indian Economy.

|| Nihar Ranjan Agasti

Apex Bank of  India’s Governor Mr.Shaktikanta Das urged for stronger corporate governance at state-run lenders to make the country’s banking sector more efficient and effective.

Elucidating the lack of appropriate and strict governance as the “elephant in the room,” Mr.Das informed this had led to elevated levels of non-performing assets, capital shortfalls, fraud, and inadequate risk management which is one of the major concern for the downfall of the country’s economy.

The role and capacity of independent boards in fostering a compliance culture by implementing the proper systems of control, audit and distinct reporting of business and risk management has been found the appropriate needs of  some public-sector banks leading to a build-up of NPAs,

Mr. Das revealed it to an audience in the western Indian city of Ahmedabad, Gujarat.

 State-run lenders control is about 60% of India’s entire banking industry. They are in fact owned and controlled by the government, with the Reserve Bank of India having limited supervision and legal powers to bring about changes in management, unlike privately-owned business houses. That consequently creates an uneven role in the efficacy of central bank regulations over state-run institutions.

This indirectly means that the political intervention into the banking system of the country only ruins the economic backbone of India.

Astonishingly, India’s banking sector has the highest ratio of stressed and Non Performing assets in the world, with many bad debts to companies in many important sectors such as energy and steel.

 A crisis in this way of shadow banking has also ascended further concern that banks, which have 7% of their loans to non-banking finance companies, will have to face a fresh spate of debt defaults.

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