##ies that the rbi gives out stingily after much public pleading. instead, what is important is sustained low inflation, something the prime minister emphasized in his independence day speech, and rate cuts are a natural consequence that the rbi has no hesitancy in delivering. stressed assets and speedy resolution let me turn to stressed assets. in dealing with stressed bank assets, rbi has been focused on getting the underlying real project back on track. there are a number of impediments here. the stigma as well as the provisioning ( and the associated fall in profitability ) attached to a loan being labelled “ non - performing ” makes banks eager to avoid the label. in some cases, they ignore the reality that existing loans will have to be written down significantly because of the changed circumstances since they were sanctioned ( which includes extensive delays, cost overruns, and over optimistic demand projections ). the debt recovery tribunal system has not been speedy, which also emboldens uncooperative promoters and keeps them from accepting their share of the losses. regulatory forbearance, where rbi makes it easy for banks to “ extend and pretend ”, is not a solution. since no other stake - holder – such as the promoter, tariff authorities, tax authorities, etc. – contributes to resolution, the real project limps along becoming increasingly unviable. bis central bankers ’ speeches meanwhile, analysts grow increasingly suspicious of bank balance sheets and the growing volume of “ restructured ” assets. also, some large promoters take advantage of banker fears about assets turning non - performing to extract unwarranted concessions, without any sacrifice in the value of their stake. regulatory forbearance therefore ensures that problems grow until the size of the provisioning required to deal with the problem properly becomes alarmingly large – which then prompts calls for yet more forbearance. forbearance is also a disservice to the bank ’ s owners ( which may include the government ) who, instead of being faced with a small problem early and being given the opportunity to apply corrective action, are faced with large problems suddenly when they cannot be pushed into the future any more. one example of the difficulties stemming from forbearance is the plight of state power distribution companies ( discoms ). in 2012, a number of states signed up to a financial restructuring plan ( frp ) with banks and the central government, based on which the rbi permitted restructured loans to discoms to be treated as standard

to do what is necessary at a time when global conditions are propitious – commodity prices look like they will stay low for a time, helping the fight against inflation, and there is plenty of money around the world and at home, looking for investments, including in distressed assets, that can help us clean bank and corporate balance sheets. as india strives to regain its place in the ranks of prosperous nations, we must remember that what sets poor nations apart from the rich is not people or resources or even luck but good governance, which comes from strong frameworks and strong institutions. a summary explanation of the economic problems of the recent past is that they arose because india outgrew its institutions. a summary of the government and the reserve bank ’ s measures to restore sustainable growth is that we are building the necessary institutions. thank you. bis central bankers ’ speeches