Reserve Bank of India (RBI) Deputy Governor R. Gandhi said on Tuesday there was an "urgent" need for banks to reduce their stressed assets, given the impact on liquidity and capital in the sector.
The RBI had received a proposal to limit the number of banks in a lending consortium as a way to improve recovery of loans, Gandhi said in a speech at an industry event in Mumbai. He, however, said such a move would have also drawbacks.
His comments come as the central bank has been pushing banks to reduce the amount of their non-performing assets and start lending again.
The government said in July it plans to inject $11 billion of capital into lenders over the next four years in a bid to help them clean up their balance sheets.