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Tuesday, September 16, 2014

RBI's `wilful default' framework vs. the rule of law

I have an article in the Indian Express today titled RBI's `wilful default' framework vs. the rule of law.


  1. Democracies don't function by having healthy respect for authorities. There is meant to be healthy scepticism and debate on any regulation. And, respect is earned. Please someone remind Mr Rajan of this next time. A regulator should not be respected just because of their title, but what they do, and I don't think RBI deserves much respect given the track record. The ball is in their court. While Mr. Rajan deserves respect for his accomplishments prior to RBI governorship, how about building a respect-worthy track record at RBI first?

  2. I think it is short term measure. In India we do not have good bankruptcy law. I have a query for Ajay. If small borrow defaults on his house loan or car loan, his cibil score becomes bad which is sahred by all banks. He/She with bad cibil score can not get loan from any bank. Why should big corporate defaulter get many money from other bank. He / She should also not get loan....

  3. I broadly agree with Ajay. But if a bunch of people want to boycott somebody, they have every right to do that. They just should not be coerced to do that.

    If banks shun a known defaulter, there is nothing wrong and it will be good for not only the bank but also the system. A form of information sharing and a similar directive from the MoF rather than the RBI would be more appropriate.

    I the RBI regulations point more towards problems in the way PSBs are managed/run, the lack of a good bankruptcy law in the country and in my opinion, most importantly, the sorry state of the justice system in the country which is slow and unpredictable.


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