Loan may have become NPA simply because of terrible luck or somebody else's fault: Raghuram Rajan

New York, Apr 19 (KNN) The non-performing asset (NPA) clean-up is simply about whether the loan is performing or not performing, said RBI Governor Raghuram Rajan adding that it may have become non-performing simply because one had terrible luck or somebody else's fault.

“Somebody cancelled your licences, didn't give you approvals on time, your partner didn't perform. There could be all sorts of reasons why companies get into trouble,” he said.

While addressing that the Inaugural Kotak Family Distinguished Lecture at Columbia Law School here yesterday, Rajan said, “If companies get into trouble, the loan becomes a non-performing asset and we very much want these assets to be back on track”.

"It is a completely separate issue of who to blame and whether there is criminal liability involved. In some fraction of the cases there may be criminal liability involved. That should be separated from the whole issue of putting the assets back on track," he said.

Noting that "asset is not a criminal", he said the asset can produce value and can function.

"It should be allowed to produce value even while there is a separate case going on if there was criminal activity involved," he said.

Rajan emphasised that the government has said very clearly it will not interfere in the process of granting loans and "I think that is a very important development. The next stage has been on trying to improve the administrative structure in the banks".

"We do want to have our banks get their money back. For that we need a proper bankruptcy system, a court system that functions in finite time and we didn't have that in the past," he said.

He said "there is reasonable chance" that the bankruptcy code bill will be passed soon and that will ensure a fully functioning system "where you can renegotiate outside of bankruptcy but the shadow of bankruptcy keeps you from getting away with too much either on the banking side or the promoter side." (With Inputs from media report)