Stop NPA cover-ups, find solutions, says RBI chief Rajan

Reserve Bank of India governor Raghuram Rajan said today that corporations and banks should not seek artificial fixes for non-performing assets, and it is important for them to clean up their balance sheets and focus on putting the asset back on stream.

''At the Reserve Bank, we keep hearing corporations come to us, banks come to us, saying 'give us some forbearance. Don't call this a bad loan even though it hasn't paid for three years. Allow us to postpone recognition'.

''This is the wrong way to do a problem. Postponing recognition will not help; if it's not paying today, it won't pay tomorrow. The best thing to do is make sure the asset itself becomes viable. Focus on putting it back on stream,''

Rajan told the annual convocation of the RBI-run National Institute of Bank Management in Pune.

''Once you focus on putting the asset back on track, the rest is accounting for it. But don't keep postponing the recognition of the problem by saying give us some forbearance, treat this as a performing asset, and so on. I think if we clean up our act, clean up our balance sheets, the markets will be willing to provide finance to the institutions that have streamlined and create the space for financing going forward.

''So let's not try to find artificial fixes, let's go about fixing in the right way,'' he said.

Indirectly admitting that the Indian economy is in for even harder times ahead, he quipped that hard times would distinguish ''the men from the boys and the women from the girls''.