Reserve Bank of India (RBI) Governor Urjit Patel has been given the ammunition to finish a war that his predecessor Mr. Raghuram Rajan started. The fight is for eliminating 180 billion dollars of stressed assets. Although people are saying that this is a herculean task but actually it’s a challenge also for Urjit Patel. Earlier many tools were provided to deal with stressed assets but those were in underutilization and the recent new announcement will force banks to use those tools.
Already Urjit Patel is trying to create a reform in few areas for India’s growth. In a press conference Reserve Bank of India (RBI) governor Urjit Patel gave a subtle message to the PM Narendra Modi, which pertains to the areas of land and labor reforms. And those issues are highly politically sensitive and hence long pending. According to him, the government needs to act at this stage to continue with the reform agenda, so that the growth story of India remains intact. He said that India will be able to achieve around 9% percent growth rate anytime soon. Patel said, “If very fundamental reforms take place like in the areas of land and labor, then a higher growth rate is possible.”
Hence, obviously, it is a challenge to finish the war as already he is engaged with so many tasks. India amended a law to give the central bank power to stimulate lenders and borrowers to take writedowns after at least 2-3 proposals to reduce the world’s highest bad-loan ratio failed to decrease bad debt. Actually, it is an opportunity also for Mr. Patel to revive credit growth that’s expanding at the slowest pace since 1992. He has been criticized for his lack of communication in the wake of Prime Minister Modi’s move to ban Eighty-Six percent of the nation’s cash, to revive credit growth that’s expanding. Mr. Patel has surprised the market with his all the economic policy decisions.
Prime Minister Narendra Modi dumped a proposal to create a so-called bad bank to help Patel build on “rock star” Rajan’s success in pushing lenders to recognize provisions for soured credit. The amendment allows Patel, to kick start the stalled process of resolving the bad debt that may help revive the investment cycle of India.
Obviously, it is very clear that this is the most important announcement in recent times,” to address the bad loan problem. Chief Financial officer of the Federal bank, Mr. Ashutosh Khajuria also termed it as the biggest announcement of 2017.
Urjit Patel was on the board of the State Bank of India for more than 3 years and after that, he became the governor of Reserve Bank of India (RBI). According to Mr. Deepak Parekh, Chairman of Housing Development, Patel has seen the pain that banks go through. That’s why he is much worried about the delinquent debt as well as the economic growth of India.
