Bengaluru: The clean up of a bank’s balance sheet was more important than growth, as was evident from the lesson every other country that had faced financial stress learnt, Reserve Bank of India (RBI) Governor Raghuram Rajan said on Wednesday.
“To the question of what comes first, clean up or growth, I think the answer is unambiguously clean up! Indeed, this is the lesson from every other country that has faced financial stress,” Rajan said at an interactive session with captains of industry and trade here.
Terming the slower credit growth as a silver lining message, Rajan said banks have not been lending indiscriminately in an attempt to reduce the size of stressed assets in an expanded overall balance sheet, which bodes well for future slippages.
“It is important that the clean-up proceeds to its conclusion, without any resort to regulatory forbearance once again,” Rajan said addressing about 300 members of the Assocham trade body on ‘Resolving Stress in the Banking System’.