A moratorium on interest payments is possible in case a state faces a crisis or problem, former RBI governor Bimal Jalan said today.
"Moratorium had been given in the past during any crisis or problem like drought and security issue," Jalan said on the sidelines of an interactive session with the MCC Chamber of Commerce and Industry.
He did not comment on whether West Bengal was right to seek an interest moratorium on the grounds of development.
The state has been seeking an annual interest payment moratorium for three years since the Trinamool Congress government came to power. Chief Minister Mamata Banerjee had often said the state had to pay about Rs 25,000 crore a year as interest to the Centre, which was hurting the state by halting development work and creating difficulty in paying salaries.
Asked to comment on West Bengal, Jalan said, "I want more money and central assistance for West Bengal but ultimately the issue is it has to be fair and accountable in the distribution of total resources among states. The principles are decided by the Planning Commission."
Jalan agreed there was a need to revisit norms on sharing of taxes raised in a state with the Centre and that there was scope for reforms.
Speaking about non-performing assets, or bad loans, in the banking sector, Jalan said it was partly due to the slowdown.
"The issue is important and the answer that we have to think about is to how to make the management accountable rather than the ministry," he said.
Asked whether two new bank licenses would be adequate for the spread of financial inclusion, Jalan said, "There is no contradiction in the principle of financial inclusion and the fit and proper criteria."
On economic matters, Jalan said the reason for policy paralysis is systematic and collective responsibility.
He stressed on the need for political reforms such as more power to state institutions and a stronger anti-defection law and called for accountability for all -- institutions, political parties or ministers.
The anti-defection law currently applies to individuals and not to political parties.
