Reserve Bank of India Raghuram Rajan said it would be wrong to assume malafide in all cases where loans turn into bad debts and that only names of willful defaulters should be made public
While advocating strong action against willful loan defaults, RBI Governor Raghuram Rajan said that loan defaults should be seen in the context of the circumstances during which the loan was cleared and disbursed.
Replying to a query during the conference on the credit policy, Rajan said that it would be wrong to take a negative view on the lenders’ judgment on a non-performing loan after the passage of several years and linking it to the changed situation prevalent at that time.
Rajan said that it would be wrong to assume mala-fide in all cases where loans turn into bad debts since many of them would be linked to business environment during that time. He said an approach which puts lenders in the dock on all cases of loan default would be detrimental both for the lenders and the corporate sector which is looking for loans to bridge their financing requirements.
Raghuram Rajan’s comment come in the wake of the raging controversy over wilful default by Kingfisher Airlines’ owner Vijay Mallya, who had left the country in the wake of lenders and government agencies on his heels to recover the nearly Rs 9000 crore owed by him to the banking system.
Rajan also said it would not be proper for the RBI or the lenders to make public all cases of defaults unless they are proved to be wilful defaults as this would spoil the environment of doing business in the country.