New Delhi:
How does a huge loan taken from a bank become NPA i.e. non-performing asset? Former RBI Governor Raghuram Rajan has explained in an interview how government corruption is responsible for this. Raghuram Rajan said that due to the corruption and wrong policies of the Congress led UPA government, bad loans (NPA) accumulated in the banks. He started tackling this problem after becoming the Governor of the Reserve Bank of India (RBI) in August 2013. The then Finance Minister Arun Jaitley gave full support in this. Raghuram Rajan was the 23rd Governor of the Reserve Bank of India from September 2013 to September 2016.
Former RBI Governor Raghuram Rajan said these things in an interview given to ‘The Print’. He said, “Apart from the global financial crisis, corruption was also a problem in India. Due to this, there was a delay in getting approval for projects. Projects did not get land. Approval from the environment department was not received. Due to these reasons, projects used to get stuck. This led to increase in NPA in the financial system.”
What is bad loan or NPA?
When a person or organization takes a loan from a bank and does not return it, it is called bad loan or NPA. This means that the chances of recovery of these loans are very less. As a result, banks lose money and go into losses. According to the rules of the Reserve Bank of India (RBI), if the installment of a bank loan is not paid for 90 days i.e. three months, then that loan is declared NPA. In case of other financial institutions this limit is 120 days.
Before the recession of 2008, banks used to distribute loans openly.
Raghuram Rajan said, “Before the global financial crisis of 2008, banks used to distribute loans openly. They did not even do adequate due diligence for this. After the global financial crisis, the situation worsened. The remaining gap was filled by the wrong policies of the government. .” He said, “There was a time when bankers used to chase entrepreneurs. They used to ask how much loan is required. Once the project gets stuck, this loan used to become NPA.”
Moratorium also caused problems
Raghuram Rajan said, “The RBI Governor who was before me, started the moratorium (loan moratorium) for the NPA loans. The result of this was that a lot of NPAs got accumulated with the banks. Due to the moratorium, they also became NPAs. They were not agreeing. But this moratorium ended with my becoming the governor in 2014.”
Jaitley helped in dealing with the problem of NPA
Former RBI Governor Raghuram Rajan told how the then Finance Minister Arun Jaitley had helped in dealing with the problem of NPA. He said, “It was very important to identify NPAs, because the credit i.e. loan going to the economy from public sector banks was continuously decreasing. If they did not do this, then these banks would not be in a position to give more loans. When the banks will remain burdened with NPAs. , They won’t even be able to give a good loan.”
The former RBI Governor said, “This cleaning of bank accounts was necessary. Public sector loans in the economy were decreasing. Without solving these things, banks will not be able to give further loans, because their balance sheets are full of bad loans. , Due to which they are hesitant in giving good loans.”
Rajan said that two things are required to review the quality of a property. First- Identifying bad loans from our side. The decisions taken by the government to save the banks were very important.”
