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Letter to BS: We are paying penalty for ignoring basic banking principles

Letter to BS: We are paying pealty for ignoring banking principles

Business Standard  |  New Delhi 

This refers to your editorial “Setback for RBI” (April 3). While the entire content of your editorial is rational, the caption is misleading. The setback is for the Indian economy and the financial sector. We are in the process of paying the penalty for abusing the financial system ignoring the basics of banking principles. The Reserve Bank of India (RBI) and the banks have gone out of the way to support the government schemes and projects aimed towards economic development.

The banks’ resources being public deposits that are repayable on due dates, timely recovery is essential for meeting their deposit liabilities on time. The centre and the state governments had been associating with the banking system to ensure adequate credit flow to priority sectors and for directing bank credit to sectors. In the process, the banking system had been stressed when repayments were delayed or in certain cases, borrowers became wilful defaulters. Accepting the responsibility as a regulator and a supervisor, the RBI has been advising and issuing directions to the banks in the interest of the financial sector.

The February 12, 2018, circular was part of the above initiatives issued with the knowledge of the government to expedite handling of loans that had turned non-performing assets. Former RBI governor Urjit Patel had spoken about the inadequacies in the central bank’s powers to enforce financial discipline in banks and the present judgment confirms his view. The centre must swiftly restor public trust in the financial system and the banking regulator.

MG Warrier, Mumbai

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First Published: Wed, April 03 2019. 21:35 IST