Banks do not have a safe like Uncle Scrooge, it is the depositors money! Another MP defends RBI decisions

Strongly defending the February 12 circular, which set a strict timetable for recognizing and resolving bad debts, Deputy Governor of the Reserve Bank of India (RBI), NS Vishwanathan, said that the banks did not have that of Uncle Scrooge, but it is the funds raised by the deposits. "

In a speech delivered in front of XLRI Jamshedpur on October 29, the deputy governor said that a strong and stable banking system was essential to the development of the economy, just acknowledged the weaknesses of the balance sheet and of to make provisions in this regard rather than pretending to believe that the balance sheet is solid.

The speech was delivered two days before the government issued a statement to calm the markets because of media speculation. The RBI issued its speech on Friday on the resignation of Governor Urjit Patel

"The banking license issued by the regulator allows these institutions to collect non-collateralised funds in the form of demand deposits from the public. It is mainly from these deposits that banks give loans to borrowers, "said Vishwanathan.

"Thus, the banks do not have a huge chest like that of Uncle Scrooge, who holds their own money from which they take out loans, but these are the funds that they collect by means of deposits which are used to contract loans, "he added.

Also read – Among the reports of the resignation of Urjit Patel, FinMin states that the RBI's autonomy is "maintained and respected" 19659004] The deputy governor's rejoinder was introduced into the conflict between the government and the RBI over several restrictions imposed by the regulator on banks in difficulty. pressure on the central bank for it to relax the PCA's standards to increase credit.

"As our insolvency and bankruptcy system matures, many aspects of the recovery of thedebt and badet quality of Indian financial system Conform to global standards … Until then, we must guard against any pressure for a dilution of standards, under the pretext of aligning them with international standards, because this would be a wise choice that would give our banks the strength to be heard and not actually, "said Vishwanathan.

Read also- The market may discipline the government: RBI's Viral Acharya in a hard-hitting speech about the center's interference; top 5 quotes

Previously, there were also subtle disagreements about the resolution of the APN. While the RBI announced its intention to consolidate a dozen resolution mechanisms into a single deadline, the government introduced its own policy called Sashakt.

The conflict arose when Deputy Governor Viral Acharya, in a strong speech on Oct. 26, governments that undermine the independence of the central bank angered the markets.