De­tach Moral­ity from NPA Clean-Up: Guv

The Economic Times - - Economy - Our Bureau

Mum­bai: Re­serve Bank of In­dia Gov­er­nor Raghu­ram Ra­jan has re­it­er­ated that it is dan­ger­ous to roll all loan de­faults into events of poor moral val­ues and there is a need to dis­tin­guish be­tween the two. “What’s hap­pen­ing on the NPA front...this be­comes loaded with a lot of moral­ity, are th­ese good peo­ple, bad peo­ple. I think one should take out moral­ity from the NPA clean-up,” PTI quoted him as say­ing at the In­au­gu­ral Ko­tak Fam­ily Dis­tin­guished Lec­ture at Columbia Law School here on Mon­day.

While the RBI gov­er­nor is driv­ing the bank­ing sys­tem to clean up the bad loans prob­lems by March 2017, he has been against club­bing all loan de­faults as a de­lib­er­ate at­tempt to cheat the bank­ing sys­tem. When the SC was ques­tion­ing the reg­u­la­tor about dis­clos­ing names of de­fault­ers he had said it may not be the right thing to do. “It may have be­come non-per­form­ing sim­ply be­cause you had ter­ri­ble luck or some­body else’s fault. Some­body can­celled your li­cences, didn’t give you ap­provals on time, your part­ner didn’t per­form. There could be all sorts of rea­sons why com­pa­nies get into trou­ble.”

If com­pa­nies get into trou­ble, the loan be­comes a non-per­form­ing as­set and “we very much want th­ese as­sets to be back on track,” the PTI re­port said.

“It is a com­pletely sep­a­rate is­sue of who to blame and whether there is crim­i­nal li­a­bil­ity in­volved. In some frac­tion of the cases there may be crim­i­nal li­a­bil­ity in­volved. That should be sep­a­rated from the whole is­sue of putting the as­sets back on track,” he said. As­sert­ing that the “as­set is not a crim­i­nal”, he said the as­set can pro­duce value and can func­tion. “It should be al­lowed to pro­duce value even while there is a sep­a­rate case go­ing on if there was crim­i­nal ac­tiv­ity in­volved,” he said.

Ra­jan em­pha­sised that the govern­ment has said very clearly it will not in­ter­fere in the process of grant­ing loans and “I think that is a very im­por­tant de­vel­op­ment. The next stage has been on try­ing to im­prove the ad­min­is­tra­tive struc­ture in the banks”.

Ra­jan said last part of the post­tantrum sta­bil­i­sa­tion agenda has been to clean up stressed as­sets in bank­ing sec­tor to en­sure banks have room to lend again. “We do want to have our banks get their money back. For that we need a proper bankruptcy sys­tem, a court sys­tem that func­tions in fi­nite time and we didn’t have that in the past,” he said.

He ex­pressed hope that “there is rea­son­able chance” that the bankruptcy code bill will be passed soon and that will en­sure a sys­tem “where you can rene­go­ti­ate out­side of bankruptcy but the shadow of bankruptcy keeps you from get­ting away with too much ei­ther on the bank­ing side or the pro­moter side”.

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