Jaitley, Raghurajan caution against over-stating bad loan crisis
12 March, New Delhi
Finance Minister Arun Jaitley and Reserve Bank of India Governor Raghuram Rajan today cautioned against over-stating the problem of non-performing assets saying such actions would create difficulty in securing loans for genuine users.
Amid heated debate over the massive default by liquor baron Vijay Mallya, Jaitley said though ”individual misdemeanour” would be looked into differently, one should desist from creating a situation where the whole process of lending suffered.
Both Rajan and Jaitley were talking to reporters after a post budget meeting of the RBI board with the Finance and other officials of the Ministry.
The RBI Governor, echoing Jaitley’s views said that while the NPAs were a matter of concern, these ”incidents should not be over-stated” as they ”hamper activities.”
He hailed the Finance Minister’s decision to stick to the fiscal deficit target, saying it was a comfort for the central bank, though he chose not to say anything on the possible rate cuts.
”The 3.5 per cent number is what he had in mind. Both Markets and the RBI have been comforted by that. How it will reflect on the monetary policy, you will have to wait and see,” Rajan told reporters after a post budget meeting of the RBI board with the Finance and other officials of the Ministry.
He said the Reserve Bank Board Board hailed the Finance Minister for the budget and the fiscal discipline.
Jaitley in his budget for 2016-17 has lowered the fiscal deficit target to 3.5 per cent of the gross domestic product in the fiscal year starting from April.
Rajan noted that economic recovery in the country was not smooth as the data on index of industrial production released by the Central Statistics office showed that factory output had declined in January for the third straight months.
”The IIP numbers were not very comfortingnot as strong as we would have liked,” he said but observed that broadly the country was moving towards strengthening growth.
The issue of non-performing assets of banks, specially defaults by industry, came in for detailed discussion at the meeting.
One of the main topics of discussion at the board meeting was the issue of non-performing assets of banks which primarily concern loan defaults and willful defaults by industry, and also the slow down in exports.