Rajan wants more powers for banks to fight stressed loans

Reserve Bank Governor Raghuram Rajan has made out a case for more powers to banks to deal with stressed loans in absence of an efficient bankruptcy law.
"We need to give banks power to deal with stressed debt... Because India does not have an efficient bankruptcy or corporate resolution system," the Financial Times Group's monthly publication 'The Banker' quoted him as saying.
In recognition of RBI's contribution, The Banker has felicitated Rajan with the title of Global and Asia-Pacific Central Bank Governor of the Year, a release said.
The governor saw consolidation as a solution in the medium term, saying premature mergers might lead to "a potentially bigger problem".

Gross non-performing assets of public sector banks had gone up to Rs 3.14 lakh crore at the end of September 2015.
On new bank licences, Rajan expressed hope that the old banks "will feel compelled" to start offering innovative products to match new entrants.

RBI has granted approval to 23 entities to operate as banks, including payments banks, to make the banking sector more competitive.
On foreign investment, the 'The Banker' quoted Rajan as saying: "The worst thing for a foreign investor is to have a whole lot of money coming into a market, the country not being able to handle it, and capital outflows wreaking damage."

RBI of late has taken several steps to increase foreign flows into the country.
Recounting RBI's achievements in the past year, The Banker said, "India is the one global economy that arguably weathered the capital outflow and currency storms in emerging markets fuelled by uncertainty over the US Federal Reserve interest rate hike in 2015."
Rajan said there is a strong link between society's
support for free markets and the fairness with which wealth and opportunity are distributed among the population.
"Unfortunately, even while inequality between countries is diminishing today, inequality within countries is increasing. Today, even well-run market economies seem to be favouring those who already have plenty," he said.

This, he felt, is because skills and capabilities have become much more important in well-paid jobs, and those born under good circumstances have a much better chance of acquiring the same.
"The winner-take-all nature of many occupations, where a few of the most capable entrepreneurs and the best workers take most of the income, accentuates the value of early childhood preparation and hence, the benefit of being born to the right parents in the right community," he said.
The governor said income inequality is on the rise, with some having colossal incomes and others worrying about the next meal.
"What can we all do to restore faith in markets? We have to work to provide effective access to schooling and healthcare for all, a non-discriminating job market with many jobs, equal opportunities for further advancement regardless of gender, race or background," he said.

These measures will "increase the perceived legitimacy of wealth and society's willingness to broaden the areas where it is spent," he said.
To students, Rajan's piece of advice was that they should earn by creating perceptible value and, equally, spend to create value. "Not only will your work be more enjoyable, but you will strengthen the economic freedom we sometimes take for granted," the governor added.
Given the importance of broadening access to all the deserving, Rajan emphasised on the need for affordable educational degrees.
"We also should make sure unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees," he added.