The Hindu : Business : Massive farm loan waiver scheme criticised

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Massive farm loan waiver scheme criticised

Special Correspondent

‘The RBI should focus more on inflation rather than worry about exchange rates’

— PHOTO: SATISH H

BRAINSTORMING: O. P. Bhatt (right), Chairman, SBI, having a word with Raghuram Rajan of University of Chicago and Chair, Committee on Financial Sector Reform, Government of India, at a conference in Hyderabad on Friday.

HYDERABAD: Raghuram Rajan, Chairman of Committee on Financial Sector Reforms, has described the massive loan waiver scheme of the Union Government as a disaster “as it will spoil the credit culture in the country.”

Delivering a special address at the Indian Banking Conference organised by the Indian School of Business (ISB) here on Friday, Mr. Rajan said: “After 15 years of getting away from the problem, the Government has vitiated it again.” Quoting extensively from the committee’s report, Mr. Rajan said that the Reserve Bank of India (RBI) should focus more on inflation rather than worry about exchange rates. The Planning Commission was working on a unique national ID number for people with biometric identification. This would facilitate banks to tag on the details of any borrower to the national ID so that the credit history of the customer would become collateral for future borrowings. His committee also suggested formulation of a decent modern bankruptcy code.

Earlier, the top brass of State Bank of India, Axis Bank, Citi Group and McKinsey deliberated upon the competitiveness of Indian commercial banks.

The market capitalisation of Indian banking industry was $90 billion, which was equal to the size of the 20th bank in China or the fifth largest bank in Singapore, said Sanjay Nayar, CEO of Citigroup. One way or the other, pointers were raised at the regulatory mechanism in the country. The 51 per cent of stake held by the Government in public sector banks (PSBs) was hampering their chances to raise capital, said O. P. Bhatt, Chairman, SBI. He said decisions were time-consuming in PSBs, as they were answerable to many constitutional bodies.

Mr. Bhatt pointed out that talent retention, use of technology, lower salaries and limited usage of entire range of channels were the main challenges faced by the PSBs, as compared to private and foreign banks

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