Banks can't get 'blanket relief' from CBI, CVC actions: Raghuram Rajan

Banks have sought immunity from 'unnecessary oversight' from agencies on decisions related to loans

Amid clamour among bankers for immunity from action by agencies like Central Bureau of Investigation (CBI) and Central Vigilance Commission (CVC), Reserve Bank Governor Raghuram Rajan has disapproved “blanket relief” but wants the decisions on loans given after appropriate due diligence to be protected.

“I think everyone has respected the need that where they take actions based on appropriate due diligence, on proper application of mind, given the situation, they should have some freedom to take actions... Otherwise, we will not get the kind of clean up, the kind of putting over-leveraged projects back on track that the economy needs,” Rajan told a select group of journalists here.

At the recent meeting of the Banks Board Bureau, the state-owned banks sought immunity from “unnecessary oversight” from agencies such as the CBI and the CVC on decisions related to loans that are taken collectively.

“As long as somebody has invested the effort in taking the right decision, they shouldn’t be held responsible based on which way the decision (goes)... Sometimes, you know, uncertainty creates the possibility that a decision turns out wrong,” Rajan said.

Best decisions taken under given circumstances should be respected, the outgoing RBI governor added.

“To my mind, this new group that has been created to examine the process by which the decision was made, will try and give them comfort on that. Beyond that, it’s not clear to me that anybody can give a blanket guarantee,” he added.

Rajan stressed on a need for an appropriate balance. “As a society we have to reach that (balance), which is that we have to respect the decision that were made, so long as they were made in the right spirit, given the information that was available at that time,” he said.