PM was sent a list of high profile defaulters, says Raghuram Rajan

Former RBI governor Raghuram Rajan in his reply to Parliamentary Panel over rising NPAs problems in banks had said that during his tenure, a list including names of high-profile defaulters was being sent to the Prime Minister's office. " The RBI set up a fraud monitoring cell when I was Governor to coordinate the early reporting of fraud cases to the investigative agencies. I also sent a list of high profile cases to the PMO urging that we coordinate action to bring at least one or two to book. I am not aware of progress on this front. This is a matter that should be addressed with urgency", Rajan said. 

In a note to Chairman of Estimates Committee Murli Manohar Joshi, he further said: "A variety of governance problems such as the suspect allocation of coal mines coupled with the fear of investigation slowed down government decision making in Delhi, both in the UPA and the subsequent NDA governments". 

Earlier on Tueaday, Union Minister Smriti Irani launched a scathing attack on the Congress over former Reserve Bank of India (RBI) governor Raghuram Rajan's remarks that most bad loans that account for Indian banks' Non Performing Assets (NPA) originated during the United Progressive Alliance's (UPA) regime between 2006 and 2008. 

However, it should be noted that Raghuram Rajan blamed both the UPA and NDA governments' slow decision making. Project cost overruns escalated for stalled projects and they became increasingly unable to service debt, he said, adding the continuing travails of the stranded power plants, even though India is short of power, suggests government decision making has not picked up sufficient pace to date.

He further said a larger number of bad loans were originated in the period 2006-2008 when economic growth was strong, and previous infrastructure projects such as power plants had been completed on time and within budget.

"It is at such times that banks make mistakes. They extrapolate past growth and performance to the future. So, they are willing to accept higher leverage in projects, and less promoter equity. Indeed, sometimes banks signed up to lend based on project reports by the promoter's investment bank, without doing their own due diligence," he said.

Rajan's reply came after in August, a parliamentary committee looking into the issue of mounting non-performing assets (NPAs) has saught former RBI Governor Raghuram Rajan to appear before it and brief on the matter. Rajan was invited after former Chief Economic Advisor (CEA) Arvind Subramanian praised him before the Parliament's Committee on Estimates, headed by veteran BJP leader Murali Manohar Joshi, for identifying the NPA crisis and trying to resolve it.

Joshi has written a letter to Rajan asking to appear before the panel and brief the members on the issue of mounting NPAs, a source told PTI. 

Rajan, who was RBI governor for three years till September 2016, is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth School of Business.

(With inputs from PTI)