Reserve Bank Governor Raghuram Rajan on Saturday said the central bank is working on a new system for making public the list of wilful defaulters and new mechanism for out-of-court settlement of bad loan-related disputes.
“We have no intent or desire to protect malfeasance. We are very happy to make that list public. In fact my people are working on making sure that we can put that list up in an accessible way and also of defaulters against whom suit has been filed because that is already public information,” he said. As of now credit information bureaus are maintaining a list of wilful defaulters — borrowers who default despite having the capacity to make repayments.
Data from Cibil, the agency which collates information on credit, show 6,819 wilful defaulters owed banks Rs 74,699 crore until December 2015, up from Rs 22,332 crore that 3,703 wilful defaulters owed until December 2012.
“We are creating a structure to help out-of-court resolution and we are still at work. It’s work in progress. We are fine-tuning it, making sure it works,” he said.
The RBI is in favour of protecting privacy of loan defaults where there are no wrongdoings. A blanket edict that everybody’s name should be made public on the website might not be desirable, he said.
Rajan said said it might not be correct to flash the name of all and sundry, including those who forgot to pay their credit bills. “We have to be weary of killing entrepreneurship in this county by putting all unsuccessful risk taking in the same basket. We need risk taking, we need people to take risk,” he said.
Rajan added the RBI is creating a structure for an out of court settlement of the disputes relating to bad debts.
He said early enactment of the bankruptcy code would give a ‘serious’ instrument in the hands of bankers, who till now lacked any such law to recover their loans in a meaningful way. “Till recently the threat that banks could make to promoters was meaningless, which is why promoters could go to bankers and say take 25 paise on the rupee, otherwise I will see you in a court for the next 15 years,” he said.
Rajan said the RBI accorded priority to protecting jobs by trying to put stressed assets back into health, while investigative agencies deal with cases of malfeasance. “I think we have it (NPAs) contained,” Rajan said while speaking at a memorial lecture.
The RBI had asked banks to start recognising all stressed assets from October-December quarter. The move led to a spurt in gross NPAs in the PSBs by about Rs 1 lakh crore to about Rs 4 lakh crore at end-December 2015. “But I also want workers in plants today, who are in danger of losing their jobs, to have that job, to be able to produce, because non-functional assets are in nobody’s interest, certainly not in the nation’s,” he said.
RBI Guv calls money a great equaliser
Stating that money empowers the society more than many other forms of affirmative action, RBI Governor Raghuram Rajan on Saturday argued for increasing society’s tolerance for its use rather than prohibiting the use of money and wealth.
Rajan said making it easy for Dalits to start businesses may do more for their social status because money empowers than many other forms of affirmative action. “It is the great equaliser, that so many people across history have been able to acquire resources and invested them to make the world we live in,” Rajan said at a function organised by the Shiv Nadar University.
“Income inequality is on the rise, with some having colossal incomes and others worrying about the next meal,” Rajan said about the widening rich-poor gap.
Unfortunately, even while inequality between countries is diminishing today, inequality within countries is increasing, he said.
In part, this is because skills and capabilities have become much more important in well-paid jobs, and those born in good circumstances have a much better chance, he said. According to him, the winner-take-all nature of many occupations accentuates the value of early childhood preparation; and hence the benefit of being born to the right parents.
Rajan also cautioned students about unscrupulous schools which leave students with high education loans and ‘useless degrees’. “We should make sure that unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees,” he said.
“The bottom line is that education at high quality research universities will remain expensive for a while, certainly till we learn to combine technology and people better,” Rajan said. ENS