In a bid to avoid crowding the market, the Reserve Bank of India has suggested that banks should not come altogether to raise capital from the market; they can probably consult each other to decide upon the timing to raise fresh capital from the market.
"What we are telling banks is that simultaneously all of them shouldn't be coming together. Then there will be a problem.
"There should be a proper sequence for it.
"These are the strategies they can adopt," said R Gandhi, RBI deputy governor, at the India Securitisation Summit organised by the National Institute of Securities Markets.
Every additional capital investment from the government was always welcome for public sector banks, he added.
"We have been guiding the banks and others also for the next five years to compile the full requirement of Basel-III where large amount of capital is required. What we are suggesting is that it should be well in advance if banks are able to shore up their capital," he said.
For banks, there are a variety of methods available to boost their capital needs and according to Gandhi, raising capital for banks wasn't a concern.
Banks were probably waiting for the right timing when it came to the price they would have to pay to raise capital.
Gandhi also said the Securities and Exchange Board of India was examining the prospects of setting up a trading and reporting platform where all securitisation transactions would be reported and a central data repository would be available to the securitisation market participants.
"Insurance Regulatory and Development and Authority of India and Pension Fund Regulatory and Development Authority have been requested to look into their roles and regulations to facilitate long-term investments by insurance and pension funds in the securitised products. RBI will always be ready to review its own guidelines on an ongoing basis," he said.
The Indian securitisation market, which breached a high of Rs 63,730 crore (Rs 637.3 billion) in March 2008, has dwindled to Rs 28,800 crore (Rs 288 billion) as of March 2014, said Gandhi adding that the appetite for securitisation in India had been on the lower side.
Asked about consolidation, wherein weaker banks would merge with larger ones, Gandhi said suggestions of such moves were always on and he believed it should be a commercial decision rather than driven by rules.
The banking sector has been dealing with the issue of bad loans and according to Gandhi this demands early reporting and management.
"We have been alerting the banks and government.
"That process will be continuously on. We have to wait and see what kind of figures come up this quarter," he said.
RBI had received the application for payments banks and small finance banks and RBI Governor Raghuram Rajan had said in the past that either of the two differentiated banks would be announced by end-August.
"These banks would help to deepen financial inclusion in the country.
"In both cases parallel work is going on. When the process is over, we should be able to announce that," Gandhi said.
