Gurumurthy, whose nomination on RBI’s central board had triggered a controversy, blamed the central bank for mandating one-shot provisioning (or setting aside funds) for bad loans. “NPA has been developing since 2009 and it peaked in 2014. At that time RBI did not say ‘you provide’ but in 2015 it said ‘you provide’. So, providing at one go is the problem. If they had said you provide over five years this wouldn’t have happened,” he said.
Instead, he backed a more gradual approach. “Any policy that lacks gradualism will always produce shocks, will invite a crisis where none exists. You want to avoid a crisis by policy but the same policy also can bring a crisis and this balance has not been maintained in forcing NPA provisions.”
The statements came in the context of Gurumurthy’s overall assessment that India was a bank-driven economy, like Japan, and the policies could not be market-driven as was the case with the US.
“The standoff between RBI and the government is not a happy thing at all… An alternative is necessary and it exists also… That is part of the overall correction of the Indian mindset,” he said during a talk at the Vivekanada International Foundation.
from Times of India https://ift.tt/2PWRlR2
