RBI could have been less negative in monetary policy review: Yashwant Sinha

Need to amend SARFAESI Act as per present day

The Reserve Bank of India (RBI) could have been less negative in its recent monetary policy review, former Union Finance and External Affairs minister, Mr Yashwant Sinha said at an ASSOCHAM event.

There is a very good case for banks to pass on the benefit of rate cut to the consumers, said Mr Sinha while inaugurating a conference on 'Asset Reconstruction Companies-Unlocking Value from Distressed Assets,' organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Talking about the concerns over weak monsoon, he said, Anyone who is familiar with crop season and behaviour of monsoon would agree with the Finance Minister that it does not depend upon all-India percentages but on spacing and timing of the rains.

Even if there is a little shortfall but the spacing and timing is right then there will be no problem for food production, said Mr Sinha.

He also said that India can deal with any kind of inflationary pressures. When NDA was in power in 2002, we had one of the worst droughts in our country and if you look up the economic survey you will find that rate of inflation wholesale price index in 2002-03 was only 3.4 per cent.

He further said that issues like monsoon related worries coupled with RBI's hawkish stance on monetary policy will not affect investor community. These are all very temporary issues as foreign investor is much better informed than most of us can imagine as they do not go by alarmist talk by whosoever is responsible for it.

He also said that there is a need for a new law to regulate securitization and reconstruction of financial assets. Let us have a law according to the needs of present and the likely needs we can anticipate for the future.

Mr Sinha suggested for amending the SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002).

This Act has certain objectives, the Act can be amended by the Parliament but very rarely the statement of objects and reasons are amended, the statement is there, this is the basic objective, study the act and its various provisions, find out where the deficiencies are, said Mr Sinha while batting for the SARFAESI Act.

10-2 years is a long time, may be certain deficiencies were there, the Act has been amended in the meanwhile, may be it needs to be amended again, he added.

On the issue of restructuring of loans by banks, Mr Sinha said, Banks must realise that asset restructuring companies (ARCs) are there to relieve them of their burden.

It should be no part of responsibility of management of a bank to directly get engaged in the business of restructuring, it should be done either by the ARCs or you don't restructure the business but the loan so that the owner/borrower will get an opportunity to take advantage of that restructuring and restructure the assets, said Mr Sinha.

Whatever has to be done, the larger banks SBI, RBI, Ministry of Finance and all stakeholders will have to put their heads together and find the solutions, he said further.

He also said that a wilful defaulter is a criminal and should be dealt with just like as a dacoit/robber.

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