New Delhi, Sep 26 (IT): Taking a dig at former Reserve Bank of India (RBI) chief Raghuram Rajan for his report on non-performing assets (NPAs), finance minister Arun Jaitley today (September 25) said a "post-mortem is easier than taking an action when required".

Jaitley's statement comes after a parliamentary panel led by Murli Manohar Joshi, on the basis of a report filed by Rajan, asked the Prime Minister's Office (PMO) to depose and provide details on what action the government initiated on a list of large corporate houses that had amassed huge NPAs.

The list, which was part of his reply to the panel, was submitted to the PMO as well during his tenure, according to Rajan.

The parliamentary panel Rajan wrote to had sought his advice and "expert view" on the NPA crisis. According to estimates, Indian banks are currently burdened with bad loans that amount to more than Rs 10 lakh crore.

Jaitley, who chaired an annual review meeting of public sector banks, said the NPAs are on the decline as recoveries have picked up.

Earlier, Rajan had also criticised Modi government's demonetisation move. In his book released in 2017, the former RBI chief had revealed that he was not in favour of the move and had told the government that the short-term economic costs associated with the decision would outweigh any long-term benefits.

What rajan wrote in his letter

Rajan, in his reply, mainly blamed the Congress-led United Progressive Alliance (UPA) era for creating one of the biggest bad loans mess. "...a larger number of [the] bad loans originated in the period [of] 2006-2008," Rajan said. He also said that too many loans were made to "well-connected promoters who have a history of defaulting on their loans".

In the letter, Rajan indicated from where the next pile of NPAs may be coming from. "Government should focus on sources of the next crisis, not just the last one. In particular, the government should refrain from setting ambitious credit targets or waiving loans," he said.

He listed Mudra loans, kisan credit card and credit for micro, small and medium enterprises (MSME) as the new NPA generators. While the NDA government has been hard-selling the Mudra scheme as a big employment generator with huge off take of loans, Rajan cautioned, "Both Mudra loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk."

Rajan also blamed public-sector banks for inadequate due diligence before and after handing out loans. Another reason behind the Indian banks' bad-loan problem, Rajan said, is that bankers fear they will be "subject to harassment by the investigative agencies" if they label a transaction as fraud.

In his reply on the NPA crisis, Rajan also spoke about the RBI's role, admitting that the central bank could have done more and that a "culture of leniency" present at the bank has started changing.

Rajan admitted that the RBI could "probably have raised more flags about the quality of lending in the early days of banking exuberance".