Larger number of bad loans originated in 2006-2008: RBI ex-chief
New Delhi, Sep 11: A larger number of bad loans or NPAs originated in 2006-2008 when Indian economic growth was strong as the banks made mistakes, former RBI Governor Raghuram Rajan has said.
He said that global slowdown, project cost overruns and government decision-making were among the factors that contributed to the process.
"A larger number of bad loans originated in 2006-2008 when economic growth was strong, and previous infrastructure projects such as power plants had been completed on time and within budget. It is at such times that banks make mistakes. They extrapolate past growth and performance to the future. So, they are willing to accept higher leverage in projects, and less promoter equity," he said.
In a note to Parliament's Estimates Committee on Non-Performing Assets (NPAs) of public sector banks, Rajan called for examining MUDRA loans and Kisan Credit Cards more closely for potential credit risk.
In the note prepared on request of committee Chairman and BJP leader Murli Manohar Joshi, the former RBI chief said that the Credit Guarantee Scheme for MSME run by SIDBI is a growing contingent liability and needs to be examined with urgency.
Rajan pointed out that the loan waivers vitiate the credit culture and an all-party agreement to this effect would be in the country's interest in view of impending elections.
The Congress and Bharatiya Janata Party have traded charges over mounting NPAs and the Congress has been pressing the Modi government to announce loan waiver to farmers.
The former RBI Governor said that sometimes banks signed up to lend money based on project reports by the promoter's investment bank without doing their own due diligence.
Rajan said that years of strong growth before the global financial crisis were followed by a slowdown which extended to India and demand projections for various projects were shown to be increasingly unrealistic.
He said that a variety of governance problems such as suspect allocation of coal mines coupled with fear of investigation slowed down government decision-making in Delhi, both in the United Progressive Alliance and its successor NDA governments.
"Project cost overruns escalated for stalled projects and they became increasingly unable to service debt. The continuing travails of the stranded power plants, even though India is short of power, suggests government decision-making has not picked up sufficient pace till date," he said.
Rajan said that once the projects get delayed promoters with little equity left in the project loses interest.
"Ideally, projects should be restructured at such times, with banks writing down bank debt that is uncollectible, and promoters bringing in more equity, under threat of losing their project otherwise."
Referring to malfeasance and corruption as a factor in the NPA problem, Rajan said: "Undoubtedly, there was some... clearly, bankers were overconfident and probably did too little due diligence for some of these loans."
However, he said, the size of fraud in public sector banking has been increasing though it still is small relative to overall volume of NPAs.
"Unfortunately, the system has been singularly ineffective in bringing even a single high-profile fraudster to book. As a result, fraud is not discouraged."
Rajan said the RBI set up the fraud monitoring cell during his Governorship to coordinate early reporting of such cases to the investigative agencies.
"I sent a list of four high-profile cases to the PMO for coordinated action to bring at least one or two offenders to book. I am not aware of the progress. This is a matter that should be addressed with urgency," he said.
Rajan pointed out that bank recovery rate on defaulted loans was only 13 per cent of the amount at stake... the inefficient loan recovery system gave promoters tremendous powers over lenders," he said.
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Notices seeking CEC's removal refer to Rahul's dissent note, incidents of voter-list manipulation
New Delhi (PTI): Notices seeking a motion for the removal of Chief Election Commissioner (CEC) Gyanesh Kumar flag issues ranging from the appointment process to his public attack on Rahul Gandhi and instances of alleged manipulation of votes in recent elections, an opposition leader said on Monday.
The notices, submitted in both Houses of Parliament on Friday, seek a motion for Kumar's removal from the CEC's post, as opposition MPs have cried foul over the Special Intensive Revision (SIR) of the electoral rolls and raised concerns over the alleged manipulation of voters' lists on multiple occasions.
The process to remove the CEC is similar to that for the removal of a Supreme Court or high court judge, meaning an impeachment can be effected only on the ground of "proven misbehaviour or incapacity".
According to the opposition leader, the around-10-page-long notices refer to a dissent note submitted by Gandhi in February 2025, when Kumar was picked for the post. Gandhi, the leader of opposition in the Lok Sabha, is a member of the panel that appoints the CEC, along with Prime Minister Narendra Modi and Home Minister Amit Shah.
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In his dissent note, the LoP had said, "It is both disrespectful and discourteous for the PM and HM to have made a midnight decision to select the new CEC, when the very composition of the committee and the process is being challenged in the Supreme Court and is due to be heard in less than forty-eight hours."
The notices also mention the CEC's public ultimatum to Gandhi from a press conference in August 2025. Amid allegations of "vote theft" by the opposition, a combative Kumar had asked the LoP to either apologise or back his claims with a signed affidavit, as required under electoral rules.
The notices also refer to allegations of manipulations in the voters' list raised by opposition parties in Karnataka's Aland and Mahadevapura.
The notices have been signed by around 130 members in the Lok Sabha and 60 in the Rajya Sabha. The signatories include leaders of the INDIA bloc parties, the Aam Aadmi Party (AAP) and some independent MPs.
According to sources, the notices list seven charges against Kumar, including "partisan and discriminatory conduct in office", "deliberate obstruction of investigation of electoral fraud" and "mass disenfranchisement".
The opposition parties have accused the CEC of aiding the Bharatiya Janata Party (BJP) on several occasions, especially with the SIR exercise, which they have alleged aims at helping the ruling party at the Centre.
If the motion is admitted in both Houses, a committee will be constituted jointly by the Lok Sabha speaker and the Rajya Sabha chairman.
The committee will consist of the chief justice of India (CJI) or a Supreme Court judge, the chief justice of one of the 25 high courts and a "distinguished jurist".
The proceedings of the committee are like any court proceedings where witnesses and the accused are cross-examined.
The CEC, too, will get a chance to speak before the panel.
According to rules, once the committee submits its report, it will be tabled in the House and discussions will commence for impeachment.
A motion to remove a judge or, in this case, the CEC, will have to be passed by both Houses.
When the House discusses the motion, Kumar will have the right to defend himself standing at the entrance of the House chamber.
