MASSIVE: Urjit Patel breaks silence, blames UPA and all pre-2014 stakeholders for NPA Mess in first public remarks since exit as RBI Governor

A failure on part of banks, government and regulator till 2014 has got us into current b loan mess and resultant low capital buffers, Urjit Patel, past Reserve Bank Goverr, has said, asking all to resist temptation of going back to status quo.

In his first comments after resigning as RBI goverr on December 10 last year amid sharp differences with government, Patel said banks indulged in over-lending, while government did t "fully play" its role, and also conceded that regulator should have acted earlier.

Speaking at an event in Stanford University on June 3, Patel listed out areas of concern for country's banking sector, including high n-performing assets (NPAs) especially at state-run lenders, and current capital buffers being "overstated" and being insufficient to tackle huge stress.

"How did we get here? Plenty of blame to go around! Prior to 2014, all stakeholders failed to play ir role equately. Banks, regulator and government," he said in presentation.

It can be ted that after 2014, which saw a change of guard in government and also Patel's predecessor Raghuram Rajan assuming charge, RBI started an asset quality review, which led to recognition of huge pile of hidden stress in system and resolution through introduction of bankruptcy laws.

se actions led to a sharp decline in banks' ability to fund needs of ecomy, where growth has been sagging.

Patel, who spent over five years at RBI, including his role as deputy goverr, vised to stay on course even in face of difficulties.

"Temptation to reset 'back to past' should be eschewed," Patel said, ding that "episodic concerns" on stability are possible if re is "foot dragging, or, worse,

back-pedalling". "Short-cuts/sweeping problem under carpet is unlikely to work; but will only delay unlocking of capital, and come in way of financing future investment efficiently," he warned.

In presentation  a copy of speech was t available  Patel also said, "After fiscal dominance over monetary policy, are we looking at fiscal dominance over banking regulation w."

Patel said an asset quality review for n-banking finance companies is "inevitable" given ir interconnectedness in financial system.

On Supreme Court striking down controversial February 12, 2018A circular, which was also a major bone of contention between him and government, Patel said only time will tell wher a system of "extend and pretend" will make a comeback.

"Issues of ever-greening  problem may emerge again. Banks may drag ir feet on decision making, viz. delayed negotiations/taking haircuts for timely resolution could come back to haunt sector," he warned. It can be ted that four days after this presentation at Stanford, RBI did come out with a revised framework after being forced by Supreme Court which struck down February circular.

Patel also went public with his disappointment with execution under Insolvency and Bankruptcy Code, saying it has "thrown up a worrying number of exceptions" and signs of "gaming" are visible as many of major cases are delayed beyond 350-day resolution window.

He also sounded peeved at divestment by government in joint ventures, special purpose vehicles and asset manment companies despite equity markets overall remaining quite buoyant.

Patel said social sector requirements and an inability to access capital markets have resulted in government's stake in many lenders going up as more infusions came from government despite fiscal constraints.

He also sounded disappointed at recent government forces bank consolidations, saying such mergers have "eroded" value of entity taking over weaker banks and termed IDBI Bank as a "highly problematic" entity, which was forced on LIC.

Patel said state-run lenders have high ratio of n-operating expenses to earnings compared to ir private sector peers.

"High cost structure of government banks is borne by ecomy; may be impinging transmission of policy rate changes," he warned.