The long overdue interrogation of the RBI regarding the failure to take action against bad loans has finally taken place and credit is due to the parliamentary panel. The panel questioned the lack of competence of the RBI as they do not act early, prior to Asset Quality Review that was undertaken in December of 2015. Sources have found familiar aspects with the report of the Standing Committee on Finance team, the RBI ought to find out as to why the very required early signals of stressed accounts were not captured before the Asset Quality Review which was planned to take place in later that year.

The report has pinpointed the pressing issue of low credit-to-GDP ratio that is occuring in India, which was 54.5 per cent as on December 2017, as compared to 208.7 per cent for China, 170.5 per cent for the UK and 152.2 per cent for the USA. “RBI should examine the asset-to-capital leverage ratio in other countries vis-à-vis India and keeping in view India’s relatively low credit-to-GDP ratio, identify ways to improve capital base of banks, without constraining growth of and equitable access to MSME, agriculture and retail segments, credit in India for meeting the needs of a growing economy,” the said report observed and it was found to be so according to the sources.

The panel then added to the analysis by noting that the various measures have led to major variations in the creditor-debtor relationship and clear, responsible banking. These include transparent recognition of NPAs after the Asset Quality Review, enhanced provisioning, massive recapitalisation, enactment of the Insolvency and Bankruptcy Code, debarment of connected parties and examining of all NPA accounts exceeding Rs 50 crores from the viewpoint of the possible fraud. Besides, steps like supervision through specialised or secret agencies in accounts above Rs 250 crores at PSBs, marking the beginning of the setting up of National Financial Reporting Authority, enactment of Fugitive Offenders Act, 2018, have also lead to clean and banking.