Banks must step up to resolve bad loans: RBI

Banks need to step up efforts to resolve their existing non-performing assets (NPA) and tighten credit risk management systems, the Reserve Bank of India said in its annual report on banking on Monday.

The asset quality of banks need to be closely watched in the changing interest rate environment as the sticky loan portfolio of small and medium enterprises might rise, the central bank said in its Report On Trend and Progress Of Banking In India for FY11.

Rising bank loans have been a rising concern for India's banking sector with rating agency Moody's Investor Service recently downgrading its outlook for India's banking sector to negative.

State Bank of India, the country's largest lender, recently reported net NPAs of 2.04% at the end of September from 1.7% a year earlier, sending its shares down as much as 7.3%.

The RBI has been one of the most aggressive central banks globally, raising its key lending rate 13 times since March 2010.

Source: Business Standard