Mumbai: Reserve Bank of India Governor Raghuram Rajan has said that bad loans in the India's banking sector have not put the banks at risk of a crisis. He said most of the problems are being faced by the public sector banks.
While speaking to a private news channel, Rajan said, "I don't think there's any risk of a crisis from the bad loans in the system, and there is a reason for it, which is bad loans are primarily in the public sector system, which means that the full faith and credit of the government is behind that."
The 23rd governor of RBI assured everybody that the banks in the country are completely safe. He said that the bad loans will not bring the banking sector down.
He made the comments after the RBI cut the statutory liquidity ratio (SLR) by 50 basis points, from 21.5% to 21%. SLR is the portion of deposits that the banks must invest in government bonds. The lower SLR means the banks will have more cash to give away in loans.
The Reserve Bank also allowed the banks more flexibility to restructure large projects in case of they run out of cash.
