"Addressing the banking sector balance sheet issues and improving the performance of particular public sector banks is a very important issue for India to support investment and its inclusive growth agenda," IMF Spokesman Gerry Rice told reporters at his bi-weekly news conference.
Responding to a question on India's banking crisis, he said the authorities have made progress in addressing the stock of non-performing assets and were taking further measures to deal with the flow problem.
"These steps include the recognition of these non-performing assets, the resolution framework under the Insolvency and Bankruptcy Code. It's in an early stage, but we think that's an encouraging development," Rice said.
He said it was a positive step as a more proactive approach was being taken to identify and closely monitor asset quality issues.
These needs to be complemented by further governance reforms in this area, especially regarding the public-sector banks to materially improve risk management and operations, he added.
"But we welcome the authority's intention to make public sector bank recapitalisation contingent on measures to strengthen governance and operations and encourage the accelerating implementation of the ongoing reforms," Rice said.