Reserve Bank of India Governor Raghuram Rajan on Wednesday said that public sector banks are not willing to lend because of bad debts. Addressing industrialists in Bengaluru, Rajan asked banks to clean up their bad debt in order to achieve stronger economic growth.
He also defended the apex bank's order to state-run banks to conduct comprehensive asset quality reviews of their balance sheets, reported Indian Express. “To the question of what comes first, clean up or growth, I think the answer is unambiguously “Clean up!,” Rajan said. Last year, he had announced an asset quality review for state-run banks for the first time that led the lenders to recognising bad loans. As a result, the figure for bad loans rose more than 70% in the six months up to March this year, NDTV reported.
Regarding the furore surrounding his announcement to not take a second term after his tenure ends in September, Rajan said, “I feel like in the last few days I’ve read a lot of my obituaries, but I have another two-and-a-half months to go. After that I’ll still be around somewhere in the world, probably a lot in India, so don’t write me off.”
Rajan announced to his colleagues in an email message on Saturday that he will return to academia when his term at the central bank ends on September 4.
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