Home music industry Avoiding crony loans, promoting infra-induced growth: the CEA for bankers

Avoiding crony loans, promoting infra-induced growth: the CEA for bankers

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Such a clawback provision will discourage “crony lending,” which not only exacerbates bad credit risks, but also deprives a worthy borrower of credit because an undeserving borrower has already cornered them.

Chief Economic Advisor (CEA) Krishnamurthy V Subramanian on Tuesday called on financial institutions to avoid “crony loans” and focus on the quality of the advances to help build large-scale infrastructure assets and sate the economy. appetite for an economy in rapid reflation.

Speaking at an Ficci event, he also argued for the recovery of compensation from senior executives of financial institutions in cases where they resorted to crony loans or greening loans with an intention dishonest. Such a clawback provision will discourage “crony lending,” which not only exacerbates bad credit risks, but also deprives a worthy borrower of credit because an undeserving borrower has already cornered them.

However, bankers should not be harassed for honest business mistakes, he said. Prime Minister Narendra Modi, also recently said that the government recognizes the cycle of ups and downs facing businesses. Thus, it does not nourish the idea that all the transactional decisions of bankers that have gone wrong constitute embezzlement.

Prime Minister Narendra Modi recently called on lenders to increase credit flows to critical and new sectors to sate the growing appetite of a rapidly recovering economy, with assurances that public sector bankers will not be harassed for honest business mistakes.

The CEA said that the banking sector since the early 1990s has faced the problem of poor quality loans, especially on large loans. Therefore, the advances were not made to most creditworthy borrowers but to friendly capitalists, resulting in a bad debt crisis, he added. The current government has blamed “blind loans” during the UPA era for the nonperforming asset crisis of recent years.

“I think it is extremely critical now that the financial sector takes responsibility for providing high quality loans, especially on the infrastructure side, and really avoids crony lending…” Subramanian said.

It is the duty of the financial sector to ensure an optimal allocation of capital in the economy, he added. According to the latest economic survey, the share of restructured loans increased from 0.74% in fiscal year 08 to 6.94% in fiscal year 2015, but the gross non-performing assets declared by banks did not have not increased as much – from 2.2% to 4.3% – during this period. This is mainly due to the fact that banks have used the possibility of restructuring loans that were on the verge of default without giving due consideration to the viability of those loans. So when an Asset Quality Review (AQR) was ordered in December 2015, a massive amount of bad debt was suddenly detected.

It is important to note that most of the NAPs concentrated in the infrastructure sector which faced problems in several respects, including external problems.

Given their expertise, development finance institutions (DFIs) will play an important role in financing infrastructure. In the fiscal year 22 budget, the government proposed to set up a DFI with an initial capital injection of Rs 20,000 crore.
The government has already identified around 7,000 projects under the National Infrastructure Pipeline, with a planned investment of up to Rs 111 lakh crore over the period 2020-25. This shows the huge need for funding.
He also budgeted for capital expenditure at Rs 5.45 lakh crore for FY22, which is up to 26.2% higher than the revised estimate for FY21 and 34.5% higher than the budget estimate for this year.


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