India's central bank governor has said there is no chance of a "Lehman moment" in India. Speaking to CNBC, Raghuram Rajan, the governor of Reserve Bank of India said while there is no banking crisis in India, it is important that banks clean up bad assets.
"There is absolutely no chance we will have a 'Lehman' moment," Rajan said, referring to the collapse of the U.S. bank that triggered a chain reaction which led to the 2008 financial crisis.
"It is about ensuring that the assets are cleaned up and investors have a good idea of the balance sheets of the bank and that process is under way and some banks have cleaned up much faster than the pace that we had set for them," he added.
He said the Indian economy is a recovering economy and while there are bad news, overall the country is getting stronger.
"I think we are a recovering economy and when you talk about structural reforms, we have seen a playout in the past few days. For example we have a bankruptcy bill that was legislated last week and we also have a monetary policy committee that lays the framework that was also legislated last week. I think structural reforms are happening, are on their way and you see more green shoots."
India has taken a crucial first step to speeding up its insolvency regime by passing the country's first national bankruptcy law. The breakthrough is expected to help India tackle its mounting bad debt problem after two of the country's largest lenders provided unprecedented guidance on non-performing loans last month.