Govt open to consider RBI demand for more powers, says Piyush Goyal

New Delhi: Interim Finance Minister Piyush Goyal said on Tuesday the Indian government was open to discussing a Reserve Bank of India demand for greater powers to regulate state banks, though he did not believe this was needed.

Last week, RBI Governor Urjit Patel told a parliamentary committee that the bank needed more regulatory powers, referring to the current dual control of the RBI and government over state banks.

Patel had said in March that the regulator had “very limited authority” over state-run banks and called for reforms to allow the central bank to effectively police such lenders in the wake of a USD 2 billion fraud.

Goyal said the federal government was committed to providing all support to state banks and strengthen their lending operations, after several lenders reported a jump in net losses last month.

“Personally, I don’t believe there is any shortage of powers but we will have discussions with the Reserve Bank and sort it out,” he told reporters after meeting heads of state banks.

Indian banks, burdened by a near-record 9.5 trillion rupees (USD 141 billion) of soured loans as of last year, reported a further rise in bad loans in the March quarter after the central bank withdrew half a dozen loan-restructuring schemes and tightened some rules.

The central bank earlier said that lacked powers to remove bank directors, replace management or force mergers or initiate liquidations of state banks. Finance ministry officials have in the past resisted the move to grant more powers to the central bank as it could limit their capacity to govern state banks.

While the RBI regulates all banks in India, 21 state-run banks are also regulated by the government, which owns majority-stakes in them.