 "Former governor Subbarao admits to 'inaction' for NPA mess")
Admitting the "action or inaction" of RBI (Reserve Bank of India) during his tenure could have been among reasons for the present bad loan crisis, former governor D Subbarao on Friday said he should have dealt with those issues.
"NPA (non-performing asset or bad loan) problem is getting bigger than any of us has thought it might be. Looking back with the benefit of hindsight, I believe I should have addressed the problem of NPA. Even as when I was writing my book, I was not very sure I have anything to add to public discourse except to say some of the causes of the present (banking) crisis owe to action or inaction of RBI on my watch.
Subbarao's comments come days after outgoing RBI Governor Raghuram Rajan, who has mandated a "deep surgery" of banks' balance sheets to cleanse them of bad loans, said the central bank should have done the clean-up job earlier. Rajan had also said lenders were initially reluctant to implement the clean-up, which started from December 2015 with RBI identifying 150 largest accounts facing problems in servicing their debt obligations.
Following the clean-up order, the banks, led by state-run ones, reported close to 14 per cent or over Rs 8 lakh crore of their assets as stressed as of March 2016, while NPAs alone crossed 7.6 per cent.
The Reserve Bank in June warned in the financial stability report that the NPA pains might worsen and that it would cross 8.5 per cent by March 2017 under its base case scenario.
Replying to a question, whether the world will again face crisis like collapse of Lehman Brothers, the former bureaucrat turned governor who recently wrote tell-all memoir ‘Who Moved My Interest Rate' said, "I think Lehman crisis like moment is unlikely but another crisis is certainly is possible." Subbarao said his worldview changed after he shifted to RBI from Finance Ministry.
