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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