India's central bank chief calls for tighter scrutiny of state-run banks

RBI has limited sway over state-owned lenders, who control 60% of the banking sector.

The Reserve Bank of India’s (RBI) chief Shaktikanta Das has called for stronger corporate governance at state-run lenders to make the country’s banking sector more efficient, reported Bloomberg.

Das said that the lack of strict governance has led to elevated levels of non-performing assets, capital shortfalls, fraud and inadequate risk management.

“The role of independent boards in fostering a compliance culture by establishing the proper systems of control, audit and distinct reporting of business and risk management has been found wanting in some public-sector banks leading to build-up of NPAs,” Das told an audience in the western Indian city of Ahmedabad.

India has one of the worst bad loan ratios amongst the top 10 economies. Its banking sector has the highest ratio of stressed assets in the world, with many bad loans to such as energy and steel.

State-run lenders control about 60% of the country’s banking industry, and although they are owned by the government, the RBI has limited supervision and legal powers to bring about changes in management, unlike privately-owned banksy.

Here’s more from Bloomberg.