Reserve Bank of India (RBI) deputy governor SS Mundra said that the creation of non-performing assets (NPAs) is not a sin, and when an account becomes non-performing, bankers and agencies concerned should do some hand-holding.

“An account becoming an NPA at the discretion of the borrower is a very small percentage. The NPA status only reveals that there are difficulties in the account; so it will not generate the same kind of cash flow which was originally envisaged. What is important is when an account becomes an NPA, the bankers and all agencies concerned should do the hand-holding,” Mundra said on the occasion of the release of India micro, small and medium enterprise report 2015 on Thursday.

The RBI deputy governor said that for MSME entrepreneurs to flourish, it is very important to distinguish between cash flow and profits, paying taxes, record and account keeping and repayment on time.

“Don’t hide the problem. If there is a problem, you need to share it with the bankers timely. In an effort to hide the problem, the problem only gets aggravated. It does not go away on its own,” he said.

On the transition of the NPA recognition period to 90 days, Mundra said it had evolved over a period of time and was similar to many global regulations.

“The regulations, as they are, have evolved over a long period of time. Some of you will recollect that when we first put the regulation way back in 1993-94, the period started with one year, then it became 180 days, and now we are at 90 days which is matching with most of the global regulation,” he said.

“If regulation can also become pro-cyclical, then it will not be a regulation,” Mundra asserted.

Days ahead of the RBI’s bi-monthly policy, the deputy governor also indicated that the emerging economic data from the US, which is considered supportive towards a possible rate hike in the US, was not a point of concern.

“If we keep on looking at each point of data which emerges globally, then probably policy formulation would become a very difficult thing. There is not too much worry about the US data which are emerging,” Mundra said.

The RBI’s bi-monthly monetary policy review is set for December 1.