NPA crisis: CEA Arvind Subramanian praises Raghuram Rajan for identifying lacuna in banking sector

New Delhi: Outgoing Chief Economic Adviser Arvind Subramanian on Wednesday expressed skepticism over the handling of the mounting non-performing assets (NPAs) crisis as he praised former Reserve Bank of India (RBI) governor Raghuram Rajan for identifying the lacuna and trying to resolve it, sources said.

Subramanian who appeared before the Parliament's committee on estimates, headed by veteran BJP leader Murli Manohar Joshi, was not convinced that the NPA issue would be resolved within a year or two, as claimed by the bankers, sources said.

He raised apprehensions about the handling of the rising NPAs and indicated that a lot needed to be done, a member who was present at the meeting said on the condition of anonymity.

Subramanian, the former economist at the International Monetary Fund (IMF) was forthcoming in his briefing to the panel and mentioned that the former RBI Governor was instrumental in identifying the problem, another member said.

He also appreciated Rajan for his efforts in tackling the crisis, the member added.

In as many words, he indicated that the decisions to approve big-ticket loans by the public sector banks were influenced. However, he did not elaborate who and how the approvals were influenced, the member said.

Chief economic adviser Arvind Subramanian

Chief economic adviser Arvind Subramanian

Subramanian also said that there was an environment of fear among the bankers and they were reluctant to lend besides retail lending.

Earlier, the committee was briefed by the top officials of Bank of Baroda, Canara Bank and Bank of Maharashtra.

On Tuesday, the same panel in a marathon four-hour meeting posed some tough questions to senior finance ministry officials, including Finance Secretary Hasmukh Adhia, about the overall condition of the economy especially the banking sector.

Members of the panel also demanded various documents including minutes of the board meetings of the public sector banks, in which high-ticket value loans were approved.

The banking sector is grappling with rising non-performing assets, which touched Rs 8.99 lakh crore or 10.11 percent of the total advances at December-end 2017.

Of the gross NPAs, the public sector banks accounted for Rs 7.77 lakh crore.

The rising number of frauds has become a serious cause for concern.

Updated Date: Jul 12, 2018 07:28 AM

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