By BS Reporter
Top bankers and representatives from the mutual fund industry will meet C Rangarajan, chairman of the Prime Minister's Economic Advisory Council tomorrow to give their feedback on ways to revive economic activity in the country.
After taking charge of the finance ministry last month, Prime Minister Manmohan Singh had stressed the need to revive the mutual fundsector. Rangarajan, a key aid of the prime minister, will take stock of the banking and the MF sector, sources said.
Banks are facing the pressure of increasing bad debt amid high interest rate situation, which has also affected credit flow to productive sectors of the economy.
According to Reserve Bank of India data, slippage ratio increased to 2.1 per cent in March from 1.6 per cent a year ago. Gross NPAs in the system were up to 2.9 per cent from 2.4 per cent and net NPAs were up at 1.3 per cent from 0.9 per cent in the same period.
The central bank said that the Indian lenders face the risk of a rise in non-performing assets as debt restructuring is on the rise with increasing number of restructured accounts in 2011-12, outpacing both credit growth and growth rate of gross NPAs. RBI also warned that risks to financial stability have increased in the last six months mainly due to the sovereign debt crisis of the Euro zone countries.
MFs are also under pressure after capital market regulator Sebi banning entry loads - the incentive that distributors used to get for selling these products - in 2009, without much discussions with asset management companies. Following the norms, lot of distributors exited the business of selling MFs. Many shifted to selling insurance products, which have high distributor incentive, to investors as investment options. As a result, MFs saw declining sales, assets under management dipped and it also saw exits of few large global names like Fidelity.
Rangarajan, who met industry chambers today, dismissed the idea of a fiscal stimulus on high fiscal burden on the government. CII President Adi Godrej, Assocham President Rajkumar Dhoot and PHDCCI President Sandip Somani met Rangarjan today and asked for speeding of pending reforms, implementation of the Goods and Services Tax from the scheduled date of April 1, 2013.