New Delhi: In his first comments after stepping down as Reserve Bank Governor last year, Urjit Patel has warned against nudging public sector banks to mass-scale lending and pump prime the economy, claiming it has the potential to flare up the non-performing asset (NPA) situation again.
Addressing an event in Stanford University on June 3, Patel listed out areas of concern for the country’s banking sector, including high non-performing assets (NPAs) especially at state-run lenders, and current capital buffers being ‘overstated’ and being insufficient to tackle the huge stress.
Patel, in the presentation, blamed stakeholders such as the government, lenders and regulator for failure to play their role in checking the NPA situation. “How did we get here? Plenty of blame to go around! Prior to 2014, all stakeholders failed to play their role adequately. Banks, the regulator and government,” he stated.
He said that banks applied ‘very little risk analysis’ and management in sifting good from bad assets.
On the regulator’s part, Patel said it should have acted earlier on the issue, whereas the “government did not fully play its role as principal shareholder and manager of economy’s health”.
“Short-cuts or sweeping the problem under the carpet is unlikely to work; will only delay unlocking of capital, and come in the way of financing future investment efficiently,” he added.
Last year on December 10, Patel had resigned with immediate effect, citing ‘personal reasons’.”On account of personal reasons, I have decided to step down from my current position effective immediately,” Patel had said in a brief statement released by the RBI.
Patel had taken charge as Governor on September 4, 2016, for a three-year term, following Raghuram Rajan’s decision not to seek a second term which had almost become the norm with earlier Governors.