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CAG Mehrishi questions RBI’s accountability over NPA crisis in banks

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New Delhi: Comptroller and Auditor General of India (CAG) Rajiv Mehrishi questioned the role of RBI in the present banking crisis, asking what the regulator was doing when the banks were lending huge amounts that resulted in asset-liability mismatch and huge bad loans.

The banking sector had non-performing assets (NPAs) or bad loans worth over Rs 9.61 lakh crore by the end of 2017-18, according to government data.

“In the present banking crisis, we all have a narrative about how it can be sorted out, recapitalisation of course, which is a very strange word to be used for the subsidies, but nobody is asking the real question that what actually the regulator (Reserve Bank) was doing. What is its role, what is its responsibility?,” he asked while speaking a the launch of Indian School of Public Policy (ISSP) here.

 

The major cause of current banking crisis is huge asset liability mismatch; but nobody is talking about this, there is a lack of public policy debate, Mehrishi said. He said India lacks a flourished bond markets in absence of which the banks are forced to lend to long-gestation infrastructure projects. And when these projects run into any hurdle, their difficulties percolate into the difficulties of the banks, he said.

The CAG also pointed out that there is a lack of public policy debate or a narrative on the root causes of the banking crisis; and also, nobody is talking or writing about the role of the regulator.

Despite from banks’ own mismanagement as well as theft of public money which are amongst the reasons behind the banking sector mess, there is much more to this which is complex to understand, he said further.

“If the banks were going berserk with their lending, then what was the regulator doing? And if it (regulator RBI) is accountable for this crisis or not, that is also a narrative nobody is talking about,” he said.

Of the over Rs 9.61 lakh crore banking sector NPAs as on March 31, 2018, Rs 85,344 crore emanated from agriculture and allied activities while the bulk of Rs 7.03 crore originated from loans to the industrial sector.

Speaking on economic reforms and the centre-state relationships in enacting changes, the chairman of the 14th Finance Commission and former Revenue Secretary N K Singh said the centre alone cannot bring about the economic overhauling.

“The economic reforms cannot merely be taken by the central government. For example labour reforms and the land reforms, it has been left to the skills of state government what they want to enact and believe the changes needed for economic reforms,” Singh said.

He also talked about the pedagogy built around the centre-state relationships and the unfinished agenda of India’s important economic reforms and said mere tinkering will not do and deep structural reforms are needed. He said India dearly needs the structural reforms and a lot of these relate to what the state governments can do in this direction.

The Indian School of Public Policy will begin its first batch of one-year full-time programme in public policy, design and management to professionals with 2-3 years of relevant experience from 2019.

The school intends to develop a new class of policy leaders for India by equipping policy professionals with knowledge, skills, wisdom and ethics to understand, design and implement local solutions to India’s enduring policy and governance challenges, ISPP said.


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Cabinet clears setting up of centralised GST appellate authority

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New Delhi: The Union Cabinet on Wednesday approved setting up of a centralised Appellate Authority for Advance Ruling (AAAR) under the goods and services tax that would decide on cases where there are divergent orders at the state level.

The setting up of a centralised AAAR would require amendments to the GST Acts. The centralised authority as an appellate body will only take up cases wherein the Authority for Advance Ruling (AAR) of two states have passed divergent orders.

The Goods and Services Tax (GST) Council, headed by Finance Minister Arun Jaitley, and comprising state counterparts, in December decided to establish the centralised AAAR.

 

“The Cabinet has cleared the GST appellate authority,” a source said after the meeting of the Cabinet headed by Prime Minister Narendra Modi.

In view of the confusion created by contradictory rulings given by different AARs on the same or similar issues, the industry had been demanding a centralised appellate authority that could reconcile the contradictory verdicts of different AARs.

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Urbanisation to be big driver of Indian economic growth: Kant

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Davos: Urbanisation will be a big driver of economic growth in India going forward, supported by favourable macroeconomic factors, accelerated infrastructure building and continuing reforms, NITI Aayog CEO Amitabh Kant said.

Speaking here at an event on sidelines of the World Economic Forum Annual Meeting, he also said the Indian economy may even exceed the IMF growth forecast of 7.5 per cent for the country.

Kant said IMF has forecast 7.5 per cent growth for India despite a gloomy outlook for the global economy and this itself is good, though there are expectations that this estimate would be surpassed. He said India is giving a big push to urbanisation with more than 100 smart cities being developed.

 

The country is also using technology in a big way to change the way business and governance is done, he added. Besides a massive infrastructure building is happening, bank credit flow has rebounded and macroeconomic factors like inflation and fiscal deficit are also being supportive, Kant said.

DIPP Secretary Ramesh Abhishek noted that states are competing with each other to attract investments and all political parties have adopted the economic reform process. He listed various reform initiatives undertaken in India, including on areas like ease of doing business, FDI, manufacturing and taxation.

They were speaking at Institutional investors’ breakfast roundtable, organised by the industry chamber CII and Kotak Mahindra Bank. Other participants included CII Director General Chandrajit Banerjee and leaders from Indian and foreign companies.

On questions about some persisting issues in doing business including on tax and insolvency related issues, Abhishek said a lot of efforts have been put in to remove all bottlenecks and starting a business doesn’t take more than a day. Besides, special provisions have been made for startups and angel investors, he added.

Kant said efforts are also being made to remove all physical intervention and digitise the entire process of inter-ministerial and inter-department consultations to fast-track the decisions.

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India will surpass China, says Raghuram Rajan

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Davos: India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries, former RBI Governor Raghuram Rajan said.

Addressing a session on Strategic Outlook for South Asia, Dr Rajan said that the Indian economy would continue to grow while growth rate is slowing down in China.

“Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter-balance to India in the region,” Dr Rajan said at the WEF Annual Meeting 2019.

 

“India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure,” he said.

The comments assume significance with China working on a lot of infrastructure projects across the region. In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second large with a GDP of $12.23 trillion.

At the same session, Nepal PM K.P. Sharma Oli cited collaboration with China as well as India as reasons for the economic growth.

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