This refers to the report "Current system protects large promoters: Rajan" (November 26). In his Third Dr Verghese Kurien Memorial Lecture, Reserve Bank of India (RBI) Governor Raghuram Rajan said the total amount of write-off of loans by commercial banks in the past five years "would have allowed 1.5 million of our poorest children to get a full university degree" from top private universities in India, with all expenses paid. This is a shocking revelation, dramatically made. The write-offs of such magnitude, according to him, were necessitated because of the erosion in the "sanctity of debt contracts" by large borrowers, many of whom insist on the "divine right" to stay in control despite their unwillingness to put in new money.
But the governor in his erudite address has not stated how such a calamitous situation has come to pass when the operations of banks are under the supervision and control of RBI. The lending policies of banks, particularly in respect of their large loans, are expected to be monitored constantly by RBI, apart from the fact that there is an RBI nominee on the board of every public sector bank (a category largely accountable for such loans). Besides, RBI conducts a detailed inspection of every bank about once a year, while the situation referred to in the lecture is said to be developing for five years.
R C Mody New Delhi
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