The Reserve Bank of India (RBI) is today a shadow of its formal self. It is facing an image crisis, just as several other key institutions of governance are. Among other things, it holds a regulatory authority. Yet, common consensus is that, unlike in the past, it has not exercised due diligence in several matters, including situations of public sector and other banks throwing caution to the winds and obliging top businessmen with grant of huge sums in loans without sufficient collateral guarantee.
The result is the piling up of Non-Performing Assets (NPAs), or bad debts, of Himalayan proportions. RBI’s role in making a mess out of the Demonetisation exercise is also well-known. At the top of all these are the failure on the part of the present NDA government headed by Prime Minister Narendra Modi to set things right.
Finance Minister Arun Jaitley himself is not above board. Yet, he now shifts the entire blame on the central bank by saying that the RBI “looked the other way when banks gave loans indiscriminately during the 2008-2014 period” – meaning the UPA terms. Question arises as to why he waited until the fag end of the tenure of the present NDA government, to make this “revelation.” Non-performing assets of Indian banks –mostly in the public sector — are of the order of Rs 400,000crore or $61.5billion. This forms about 90 per cent of the total NPAs. Much of these bad debts, or un-repaid loans, are remaining as they are, as the business sharks are avoiding repayment even as they have the capacity to do so. Vijay Mallya is just one among the many who are believed to have fooled banking institutions and scooted from the scene with rare ease.
Granted that the present government exercised some caution and tried to regulate matters, fact is also that it has not accorded the seriousness it deserved for the recovery process. A part of the blame lies with courts, which halt recovery processes at the drop of a hat. The Company Law Board too is seen taking things easy. What the government could have done to speed up matters were often not done. Blaming the political rivals for what went wrong in the past alone will not help.
It is understandable that top RBI officials are not enthused at the comments made by Jaitley. However, their defence of the wrong actions by seeking to put the blame on politicians will not cut much ice.
