‘Ensure borrower discipline’

NITI Ayog CEO Amitabh Kant announcing the new schemes of the Government during a press conference in New Delhi on December 15, 2016.   | Photo Credit: R.V. Moorthy

With the Supreme Court quashing the Reserve Bank of India (RBI) circular on loan defaults, the central bank and the government will now have to sit together and bring a new regulation to ensure financial discipline among borrowers, said NITI Aayog Chief Executive Officer Amitabh Kant.

“A lot of work has been done by the government and the RBI to bring financial discipline and good regulation to end crony capitalism in India,” Mr. Kant said, speaking on the sidelines of a capital market event organised by the World Federation of Exchanges and the National Stock Exchange.

“It is important that we ensure discipline so that money borrowed from financial institutions is repaid. [With] the Supreme Court striking down [the RBI circular] as ultra vires, the issue needs to be relooked by both RBI and central government to arrive at a new regulation, which will ensure that the financial discipline from borrowers should continue,” he added.

On Tuesday, the apex court struck down a February 2018 circular issued by the RBI that gave lender banks six months to resolve their stressed assets or move under the Insolvency Code against private entities who have defaulted in loans worth over ₹2,000 crore.

Incidentally, one of the factors missing from the RBI circular, as per the apex court order, was an authorisation from the government.

‘Long-term growth’

Mr. Kant, a 1980-batch officer of the Indian Administrative Services (IAS), further said that the regulation was essential for the long-term growth of the country, and hence the banking regulator and the government would have to come up with a new regulation.

Earlier in the day, while delivering the keynote address at the event, Mr. Kant said that the Indian economy must grow rapidly at 9-10% even as the country faced four main challenges — manufacturing with a focus on exports, gender parity, agriculture, and transforming areas that have remained backward.

He highlighted the fact that while India had demonstrated that it can manufacture on a huge scale, the focus had to be on exports that gave better value per unit of sales.

He also said that agriculture needed radical reforms and outdated laws related to Agriculture Produce Market Committee (APMC) and Essential Commodities Act needed to be scrapped.

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Printable version | Jan 22, 2021 4:43:41 PM |

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