Rajan wants wilful defaulters to behave, not to flaunt money. Mallya listening?

In a stern message to wilful defaulters, Reserve Bank Governor Raghuram Rajan has said rich businesses owing large sums to banks should behave and not flaunt “massive birthday bashes” while still in serious debt. In a reply to a question that India has borrowers too big to repossess, he said, “we are trying to change that. Let me emphasise that this is not about big businesses, not about rich people. This is not Robin Hood issue. This is an issue about the wrong doer amongst the community, who had raised the cost of borrowing for everybody.” [caption id=“attachment_2542094” align=“alignleft” width=“380”]  Raghuram Rajan. PTI[/caption] “If we can get those guys to behave … If you flaunt your massive birthday bashes etc even while owing the system a lot of money, it does seem to public that I don’t care”. This, he said, gives wrong message to the public at this point of time. “If you are in trouble you should show that you care by cutting down your expenses and not flaunting more spending in public,” he told NDTV. Rajan was clearly hinting at Vijay Mallya of grounded Kingfisher Airlines, who owes more than Rs 7,000 crore to various public sector banks, including the State Bank of India. The banks’ attempts to recover the loan has been unsuccessful as the value of his collaterals has declined significantly over the years. According to media reports, Mallya had recently had a bash in Goa to celebrate his 60th birthday. The governor further said that RBI was creating processes for banks to recover money. “Now we are pushing them to be more firm in their dealing with the borrowers and cleaning their balancesheets with idea that not to shut down firms but to put them back on track into an earning mode so that they can repay the banks,” he said. Last month, the RBI had asked banks to clean up their balance sheets by March 2017. They have been given more powers and flexibility to deal with bad loans, which crossed 6 percent mark as of June quarter. The gross NPA of public sector banks rose to 6.03 percent of total advances as of June 2015 from 5.20 percent in March 2015. Replying to a question on the rupee, Rajan said the Indian currency is in fairly good position compared with other emerging nations. “We are in fairly good position and we have fairly good people monitoring all the time. Of course I do look at it but I don’t lose sleep over it,” he said. He further said that “if you look” at the rupee over the last couple of the years, in real effective terms which means adjusting for our inflation relative to the rest of the world, “we are absolutely flat”. “We shouldn’t be too strong or too week. Just enough to make sure that we are competitive, but we don’t have the free fall depreciation that the rubble, the Brazilian real had which generate huge amount of inflation and creates problem down the line,” the governor said. He also appreciated the government’s recent programmes like Startup India and crop insurance. With PTI