Letter to BS: Stand taken by Rajan is self-contradictory to say the least

The stand taken by former Reserve Bank of India (RBI) governor Raghuram Rajan is self-contradictory to say the least. On the one hand, he has submitted at the Parliamentary Committee that he sent a note to the Prime Minister’s Office (PMO) in which he had argued in favour of taking action against one or two big defaulters of bank loans to make an example. Some politically motivated people are only harping on that. On the other hand, he has also said in course of his many submissions, as reported widely in newspapers, that it was not quite practicable to take effective action against defaulters before the insolvency law. The insolvency law, which he supports, was not there at that time. So how does he say that the PMO could make one or two examples in big cases?

Second, why does he ask the government to do that? Why does not the RBI do that with the banks under its control? What power does the government have, which the RBI does not have, by which the willful defaulters can be punished? Ultimately the banks have to take action. RBI has never taken the view that the banks are defying the action suggested by them.

So Rajan’s recent stand is clearly self-contradictory.

Sukumar Mukhopadhyay  New Delhi

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