Raghuram Rajan Blames 'Over Optimistic Bankers' and 'Policy Paralysis' for Mounting Bad Loans
New Delhi, Sept 10: Former RBI governor Raghuram Rajan has blamed the “over optimism of bankers” and “policy paralysis” for mounting non-performing assets (NPAs) in his reply to a parliamentary committee which had sought his views on the pressing issue.
In a report, CNBC TV-18 quoted sources as saying that Rajan told the Murli Manohar Joshi-led panel that banks didn’t do “due diligence” on large loans and the post-2008 slowdown made their growth projections quite unrealistic
Fmr @RBI Guv Raghuram Rajan sent note on causes, cures of NPAs to Estimates Committee, says NPAs caused by bankers' over-optimism, growth slowdown: Sources to @latha_venkatesh #CNBCTV18Exclusive
— CNBC-TV18 (@CNBCTV18Live) September 10, 2018
Alert: Estimates Committee had requested Rajan for his take on NPAs pic.twitter.com/C7CiRuL8S3
The former RBI chief is also learnt to have said that banks extended more loans to prevent ‘zombie’ loans from turning non-performing assets.
The Parliament's Committee on Estimates had invited Rajan to brief it on the matter after former Chief Economic Advisor (CEA) Arvind Subramanian praised him for identifying the NPA crisis and trying to resolve it.
Rajan, who was RBI governor for three years till September 2016, is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth School of Business.
#CNBCTV18Exclusive | Rajan on his note to the committee adds PSU banks personal & housing loans didn’t slow despite Asset Quality Review (AQR) pic.twitter.com/0awI4mSY4C
— CNBC-TV18 (@CNBCTV18Live) September 10, 2018
The panel has already questioned senior finance ministry officials, including Finance Secretary Hasmukh Adhia and top brass of banks, about rising bad loans.
Members of the panel also demanded various documents including minutes of the board meetings of the public sector banks, in which high-ticket value loans were approved. The banking sector is grappling rising non-performing assets, which touched Rs 8.99 trillion or 10.11 per cent of the total advances at December-end 2017.
#CNBCTV18Exclusive | Raghuram Rajan on his note to Estimates Committee says had sent list of high-profile fraud cases to PMO for co-ordinated investigation pic.twitter.com/U5nEeGlvlD
— CNBC-TV18 (@CNBCTV18Live) September 10, 2018
Of the gross NPAs, the public sector banks accounted for Rs 7.77 trillion. The rising number of banking frauds has also become a serious cause of concern.
Courtesy: www.news18.com
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Trump launches new effort to reopen Strait of Hormuz
Dubai (AP): US forces on Monday launched an effort to guide commercial ships through the Strait of Hormuz, where hundreds have been stuck since the Iran war began.
Two American-flagged merchant ships have “successfully transited” through the critical waterway, the US military said. Separately, the US military denied Iran's claims that it struck an American Navy vessel southeast of the strait.
Iran handed over its latest proposal for negotiations with the US to mediators in Pakistan, Iran's state-run IRNA news agency reported Friday. Trump subsequently said he's “not satisfied” with it, but did not elaborate on the proposal's apparent shortcomings. The shaky ceasefire between the US and Iran has lasted for three weeks.
Here's the latest:
European leaders see Trump's troop drawdown from Germany as new proof they must go it alone
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European leaders on Monday said President Trump's snap decision to pull thousands of US troops out of Germany came as a surprise but is a fresh sign that Europe must take care of its own security.
The Pentagon announced last week that it would pull some 5,000 troops out of Germany, but Trump told reporters Saturday that “we're going to cut way down. And we're cutting a lot further than 5,000.”
He offered no reason for the move, which blindsided NATO, but his decision came amid an escalating dispute with German Chancellor Friedrich Merz over the US-Israeli war on Iran, and Trump's anger over European allies' reluctance to get involved in the conflict in the Middle East.
Wall Street hesitates and oil prices climb with uncertainty about the Strait of Hormuz
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The US stock market is holding tentatively near its record heights Monday, while oil prices climb with uncertainty about when oil tankers can resume crossing the Strait of Hormuz and restore the world's flow of crude. Dueling claims about a possible Iranian strike on a U.S. Navy vessel in the strait heightened the tensions.
The S&P 500 slipped 0.1 per cent, coming off its latest all-time high. The Dow Jones Industrial Average was down 216 points, or 0.4 per cent, as of 9:35 am Eastern time, and the Nasdaq composite was up 0.1 per cent.
The action was stronger in the oil market, where the price for a barrel of Brent crude climbed 2 per cent to USD 110.37 and briefly topped USD 114 during the morning. Iran's closure of the Strait of Hormuz due to its war with the United States has kept oil tankers pent up in the Persian Gulf and away from customers worldwide. That in turn has sent the price of Brent soaring from roughly USD 70 per barrel before the war.
Iran stands firm on its grip of the strait
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The disruption of the waterway has squeezed countries in Europe and Asia that depend on Persian Gulf oil and gas, raising prices far beyond the region.
Trump has promised to bring down gas prices as he faces midterm elections this year.
The US has warned shipping companies they could face sanctions for paying Iran for transit of the strait. It has enacted a naval blockade on Iranian ports since April 13, telling 49 commercial ships to turn back, U.S. Central Command said Sunday. The blockade has deprived Tehran of oil revenue it needs to shore up its ailing economy.
US officials have expressed hope the blockade forces Iran back to the negotiation table.
US claims progress in reopening the Strait of Hormuz, saying two merchant ships have transited
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The US military said Monday that two American-flagged merchant ships had successfully transited the Strait of Hormuz and Navy guided-missile destroyers in the Persian Gulf were helping to restore shipping traffic. It separately denied Iran's claims to have struck an American Navy vessel.
The announcement came a day after US President Donald Trump announced a new initiative to help guide ships through the critical waterway for global energy. Iran has effectively closed the strait since the US and Israel started the war Feb 28, rattling the global economy.
The US-led Joint Maritime Information Center has advised ships to cross the strait in Oman's waters, saying it set up an “enhanced security area.” U.S. Central Command didn't say when the Navy ships arrived or when the merchant vessels departed.
It was unclear whether shipping companies, and their insurers, will feel comfortable taking the risk given that Iran has fired on ships in the waterway and vowed to keep doing so.
