difficult years

Source: The Hitavada      Date: 05 Sep 2018 11:54:07

DESPITE the good tidings from the economic front, despite the robust growth of Gross Domestic Product (GDP) beyond 8%, despite the overall appreciation the Indian economy has earned globally, it must be said that his two years in office as Governor of the Reserve Ban of India (RBI) have been a difficult period for Dr. Urjit Patel. His arrival in the coveted office after the (unexpected) exit of Dr. Raghuram Rajan, was clouded by the massive failure of the banking sector to check the non-performing assets (NPAs), and overall disparities in performances of various sectors of the economy. Though the last two years did see some stability in the country’s economic management, thanks to Dr. Patel’s deft leadership of the seriously challenged system, the banking sector could not achieve sensible levels of success in rectifying its own ills. It is from this angle that a fresh round of scrutiny of Dr. Patel’s tenure has begun in the financial circles. 

The real challenge is in banking, as the whole nation knows. The NPAs is one problem whose answer nobody seems to know in practical terms. This issue has assumed such menacing proportions simply because of what can be generally described as crisis of character at all levels of management of banking system as well as the people who derived unfair advantage from the flaws. To this crisis of character, one Dr. Urjit Patel -- or anybody else for that matter -- cannot have an effective and quick answer. The solution will have to be sought in a patient and painstaking manner so that the problem is sorted out from multiple angles -- like flaws in system of lending money to parties, or the system of extracting right collaterals, or the elimination of political component in the process of clearing huge loans ...!


The last of the issues -- political component -- is something that the Modi Government is promising to eliminate and is appearing to act on it. Yet, before this started happening, the banks had lost countless lakhs of crores of rupees in bad loans whose recovery seemed almost impossible. It must be said to the credit of Dr. Urjit Patel that he worked systematically to herald the end of favouritism in the loans sector, and also put into effect a mechanism that started a regime of auto-exposure of bad loans or NPAs. The Nirav Modi or Mehul Choksi scandals came to light because of the new mechanism which was put in place by the Government. A fair share of credit must be given to Dr. Patel for the changing atmosphere in banking.


Of course, a long distance has to be traversed still and the country’s economic management system will be stretched beyond belief as uncouth elements are still at work, perhaps still enjoying some patronage at higher levels. From those angles, Dr. Patel’s work assumes a rather difficult tone. Yet, it must be admitted that he has tried his best to rectify the ills dogging banking and other sectors of the economy. The main task of the RBI is not generally to manage the details, but issue guidelines for economic management and monitoring of their implementation. In these tasks, Dr. Patel did demonstrate a fair degree of control whose importance cannot be underestimated.


The scrutiny of Dr. Patel’s and the RBI’s performance at the end of a two-year period is not just fair but also necessary. For, such a scrutiny allows an opportunity to the nation to redefine and later redesign norms as per the changing needs. Given the high degree of difficulty in executive some of the assignments before the RBI, Dr. Patel should be given due credit for having proved equal to the task. The journey is, no doubt, long and arduous, and thankfully the Government realises it. With better signs springing up on the economic front, there is every reason to be hopeful of great recovery from various sectors lagging by national standard. There is no doubt, Dr. Patel will lead that effort well.