NEW DELHI : The former RBI governor, Urjit Patel in his book writes how amendments to insolvency laws introduced by Modi government, paved way to pushing huge debts beyond recovery powers of the public sector banks. The book makes scathing criticism of the Central government and narrates how all efforts initiated since 2014 to help banks recover their lending were abruptly overturned by the amendment.
In 2018 during his term, the RBI issued a powerful notification empowering banks to recover their bad loans. The banks in turn braced up to confront its defaulters over longstanding massive debts. This impacted large borrowers, including corporates, who were quick to appear before the national tribunal, seeking to annul the notification. The matter was referred to the Supreme Court. In an unexpected turn, the lawyers slated to appear for the RBI backtracked in the last minute. Subsequently, RBI was forced to withdraw its notification.
Not-so-coincidentally, differences between Urjit Patel and the Centre too began to erupt later that year - a series that culminated in his unceremonious resignation. With Patel gone, the Centre crafted its amendments to dilute insolvency norms with aims to helping large defaulters, mostly corporates. Patel in his book says, there arose immense pressure from varied quarters to pull back the crucial RBI notification.
Incidentally, the RBI in its latest warning has forecast loan debts to rise to a 20-year-high in coming months.
