Centre’s heavy-handed manner of dealing with bad loans has caused banking crisis, says P Chidambaram
Banks have no money to lend ‘in a climate of suspicion and vendetta’, said the former finance minister.
Senior Congress leader and former Union Finance Minister P Chidambaram on Friday criticised the Narendra Modi government’s banking policy and accused it of adopting a heavy-handed approach to deal with the problem of non-performing assets.
“In a climate of suspicion and vendetta, the only thing a banker looks forward to is the date of retirement,” tweeted Chidambaram. “Thanks to the NDA government’s heavy-handed approach to the NPA problem, banks have no money to lend and bankers have no mind to lend.”
Chidambaram claimed export credit has declined from Rs 39,000 crore in June 2017 to Rs 22,300 crore in June 2018. “Yet government claims that it is taking steps to boost exports,” he added.
Last week, the Congress leader said the measures taken by the Centre to stop the depreciation of the rupee were “half-hearted”. “Government’s five ‘measures’ announced yesterday are half-hearted and too late,” he had tweeted. “Because government was in denial.”
On September 11, Union minister Smriti Irani accused former Congress President Sonia Gandhi of having led a government that “attacked the very core of the Indian banking system” during her party’s rule. She cited a note by former Reserve Bank of India Governor Raghuram Rajan, who listed the over-enthusiasm of banks between 2006 and 2008 as one of the reasons for the bad loans crisis. A Congress-led government was in power during the period.
“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 [Congress-led United Progressive Alliance] and the subsequent NDA [National Democratic Alliance] governments,” Rajan wrote. “Stalled projects became increasingly unable to repay debts, and current trends show the decision-making has still not picked up sufficiently.”