Not Rajan’s fault

This is with reference to “Rajan’s policies, not note ban slowed growth, says the NITI VC” (September 4). I disagree with the NITI Aayog vice-chairman‘s contention that the former Reserve Bank of India Governor Raghuram Rajan’s (pictured) policies led to the situation where the banks could not lend because of their high non-performing assets (NPAs). The asset quality review (AQR) instituted under Rajan enabled the correct and rigorous identification of NPAs that brought an element of complete transparency in the stressed assets position of banks and started the process of resolution of NPAs.

Though the genesis of the NPAs in the public sector banks clearly lay in the pre2014 years, the process continued in 20142015. As the RBI nominee director on the board of one of the PSBs during 2014-15, I can say that in 2014-15, the PSB boards continued to sanction loans to large corporates that had defaulted in repayments despite their weakening financial health, downgrading in their credit rating etc. This was facilitated by the various restructuring schemes of the RBI that helped in delaying the classification of stressed assets as NPAs. The other thing noticeable during this period was PSBs resorting to evergreening of defaulted loans by granting adhoc and other type of loans to prevent them from being classified as NPAs. The RBI knew this was happening. It was only with the introduction of the AQR that the real position of NPAs was revealed. All the prominent members of the present dispensation hate Rajan for all the wrong reasons.

Arun Pasricha New Delhi