Facing tough questions from the country’s top court over the reluctance to disclose names of big wilful loan defaulters, Reserve Bank Governor Raghuram Rajan Saturday said that the bank was working on a new system to make public the list of willful defaulters.
Delivering a lecture at Shiv Nadar University in Dadri in NCR region, Rajan said, the central bank, however, is in favour of protecting privacy in cases where there is no wrongdoing.
He said, a blanket edict that everybody’s name should be made public on the website might not be desirable.
He said we need to have genuine risk takers. He said in business risk taking is necessary.
Dr Rajan said, RBI is also creating a structure for an out of court settlement of the disputes relating to bad debts. He said, the central bank is fine tuning this mechanism to ensure that it works. Dr Rajan said, if the banking system fails to deal with the problem of bad debt now, it will explode.
Complimenting the government for passing Insolvency and Bankruptcy Code Bill, he said, till recently Indian banks did not have enough powers to persuade promoters of companies to pay loans.
File Photo: Finance Minister Arun Jaitley with RBI Governor Raghuram Rajan in the USA.
Lok Sabha on Friday passed the Bankruptcy Bill that will allow faster decision making on the applications in case of business failures.
Rajya Sabha is expected to take up the bill on Monday or Tuesday, in the second part of ongoing budget session.
Raghuram Rajan also warned against excessive banking regulation saying it may lead to activities shifting to shadow financial system.
He said slowdown in branch expansion by foreign banks in India could be due to regulation among other reasons.
RBI governor said Indian central bank knows how to regulate banks but it does not know how to regulate the shadow financial system.
Shadow banking system usually refers to the financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight.
