Don’t throw good money after bad money, Rajan's advice to banks

June 22, 2016 05:15 pm | Updated November 17, 2021 05:13 am IST

BL 1-4-2014 MUMBAI, MAHARASHTRA: RBI Governor Raghuram Rajan during the announcement of RBI monetary policy at the RBI Headquarters in Mumbai on Tuesday.Pic by SHASHI ASHIWAL

BL 1-4-2014 MUMBAI, MAHARASHTRA: RBI Governor Raghuram Rajan during the announcement of RBI monetary policy at the RBI Headquarters in Mumbai on Tuesday.Pic by SHASHI ASHIWAL

RBI Governor Raghuram Rajan delivered a speech on "Resolving Stress in the Banking Sytstem" at Bangaluru during an interactive meeting with industry and trade.

Business Correspondent Manojit Saha gave live updates:

6:30 pm: Rajan ends his speech.

6:20 pm: "The government and the RBI are helping our public sector bankers in this difficult but critical task"

6:15 pm: Rajan says in the last three years, RBI have paid all the surplus to the government

6:10 pm: Rajan says the proposal of RBI providing capital to banks is attendant conflicts of interest.

6:05 pm: Raghuram Rajan on CEA Arvind Subramanian's proposal of RBI capitalizing govt banks: "This seems a non-transparent way of proceeding"

6:04 pm: Govts are sometimes reluctant to infuse bank capital as there are so many more pressing demands for funds

6:03 pm: It is better that government capital be infused quickly in banks, says Rajan

6:02 pm: Rajan says easier monetary policy is no answer to serious distress, contrary to widespread belief

6:00 pm: "To the question of what comes first, clean up or growth, I think the answer is unambiguously “Clean up!”

5:58 pm: Those who diverted money, banks/investigative agencies should send the msg that alternatives to repayment can be harsh, says Rajan

5:50 pm: Rajan says RBI has set up fraud monitoring cell to coordinate early reporting of fraud cases to investigative agencies

5:45 pm: Rajan says bank investors, after initially getting alarmed by the size of the disclosures, have bid up PSB bank shares

5:40 pm: Mr. Rajan says RBI will shortly license a number of new Asset Reconstruction Companies (ARCs)

5:38 pm: We should send message that no one can get away. Glad that the PMO is pushing prosecution of large frauds, says Rajan

5:36 pm: "We have coordinated with SEBI to increase penalties for wilful defaulters"

5:34 pm: "Important that banks do not use the new flexible schemes for promoters who habitually misuse the system"

5:30 pm: "Indebted promoters are being forced to sell assets to repay lenders," says the RBI Governor

5:27 pm: Rajan says there is still room for upward valuation PSU bank shares if they can improve the prospects of recovery.

5:25 pm: Over-borrowed promoters often propose increase in scale so that bank’s outstanding debt and new loans all become serviceable: Rajan

5:20 pm: Rajan says, If the project is unviable, doubling its size does not make it any more viable.

5:17 pm: 'Don’t throw good money after bad money because there is an unreliable promise that debt will become serviceable'

5:16 pm: Governor Raghuram Rajan's message to banks: Complete projects that are viable, even if it requires additional funds infusion.

5:15 pm : Process for recovery, despite laws like SARFAESI, is prolonged and costly, especially when banks face well-connected promoters: Rajan

5:14 pm: Private banks' interest rate are equal or higher than PSU banks. Yet rivate banks' credit growth does not seem to have suffered, says Rajan

5:13 pm: Need to get govt banks back into lending to industry/infra, else credit and growth will suffer as economy picks up, says Rajan

5:10 pm: Rajan: Private sector banks cannot substitute fully for the slowdown in public sector bank credit.

5:09 pm: Rajan: Govt banks were shrinking exposure to infrastructure/industry from early 2014 because of high past NPAs

5:08 pm: Rajan says slowdown in credit growth only in public sector banks not in private sector.

5:07 pm: Rajan says credit growth slowed down mainly because of stress and not because of high interest rate.

5:05 pm: RBI Governor Raghuram Rajan speaking on "Resolving Stress in the Banking System" in Bengaluru.

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