Raghuram Rajan, RBI governor, has called for strengthening the government-run bank boards, attracting talent by lifting salary disparities with private sector peers, at a time when bad loans are rising on their books.
In an interaction with the media a day after the monetary policy review was unveiled, Rajan said: "In the last few years, health of PSU banks is deteriorating. Bad loans and restructured assets are rising." He has also called for measures to tackle the bad debt problem by having a bankruptcy code and more teeth to the asset reconstruction companies.
According to him, the economy is a complex animal and India needs credible policies for growth and stability.
Talking about willful defaulters, he said non-cooperative promoters are a financial risk. "Though he may not be a criminal, he is using the laws to his advantage. We need a first rate bankruptcy code, there are versions in the companies act."
The central bank has kept its sole focus on inflation fighting. "Inflation is a disease we have to get rid off if we want a sustainable growth." It has continued to fight the inflation demon for over last two years, and has clarified that the interest rates are unlikely to come down in next 3-4 quarters.
According to him, moderate inflation is fine. But the high level of inflation India had of close to 10% and above is detrimental in many ways.