New Delhi, Jan 7 (IANS): Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday said the banking regulator will continue reforming the beleaguered banking sector but will not impose restrictions that may throttle the functioning of banks.

"We are also looking at what kind of governance reforms can be brought about in the working of the banks without again... We do not want to create a framework which imposes restrictions that restrict or throttle the functioning of banks," Das said.

Speaking to reporters in the national capital for the first time since assuming the post of RBI Governor, Das said he has been meeting various stakeholders to ascertain issues related to liquidity, credit growth and non-performing assets (NPAs).

"So, without throttling (and) without putting impediments in any manner on the working of the banks, allowing them sufficient commercial flexibility and creating an environment where the banks not only come out of the NPAs but also grow," he said.

Das said the current focus of the RBI is the state of NPAs and the health of the public sector banks. The total gross NPA of Indian banks currently is more than Rs 10 lakh crore, and 11 out of 21 state-run banks are under RBI's Prompt Corrective Action (PCA).

"There is considerable amount of improvement (in NPA reduction) but the improvements will have to be sustained if the banks have to fulfil their responsibilities and if the banks (those under PCA) have to become healthy again," he said.

Reports on country's financial stability and trends on banking sector released late last month reveal improvement in reduction of the NPA levels of the banks as a whole and of the public sector banks in particular, the Governor said.

"We do realise that governance reforms are an important component of the revival of public sector banks," said Das who replaced Urjit Patel as RBI Governor last month after Patel resigned following a tiff with the government on liquidity issue.

Assuring continuous monitoring of the liquidity situation and adequate measures by the RBI, Das said he would meet non-banking financial companies (NBFCs) on Tuesday in Mumbai to get their perspective on the liquidity crunch being faced by them.

The RBI recently announced additional open market operations (OMOs) of Rs 60,000 crore as part of its measure to infuse liquidity in the economy.

However, warning against excess liquidity that can create adverse consequences, the central banker said any infusion of liquidity will have to be "need-based".

"RBI would not like a situation where liquidity becomes a kind of a loose money. Any infusion of liquidity will have to be very carefully considered and has to be need-based. So, caution and care has to be exercised by the RBI," he said.

Further, speaking on the micro, small and medium enterprise (MSME) sector, Das, who held a meeting with some MSME associations on Monday, said the RBI has directed the banks to check the viability of MSMEs before extending the loan restructuring scheme.

"The effort is to see that maximum number of MSME units get the benefit but then again while extending the benefit the viability aspect also has to be considered because without going into the viability aspect, it would not be possible to implement the restructuring scheme," he said.

On farm loan waivers, Das said while the decision lies with the state governments based on the fiscal space they have, a generalised waiver of farm loans "has an adverse effect on the credit culture and future credit behaviour of the borrowers".