Former Reserve Bank of India Governor Raghuram Rajan's revised mechanism to identify bad loans were responsible for a whopping rise in the non-performing assets and a consequent slowdown in the economy, Niti Aayog Vice Chairman Rajiv Kumar has said.
“The NPAs rose from Rs 4 lakh crore when the [resent government took office to Rs 10.5 lakh crore by 2017 due to Rajan's revised mechanism for identifying NPAs after which banks stopped giving credit to industry,” Kumar told television news agency ANI in an interview after the first quarter (April-June) economic growth numbers came out last week.
ANI tweeted the excerpts of the interview on Monday.
Kumar said due to Rajan's policies banks stopped giving credit to small and medium industries. Even in the large industries, the credit growth came down to 1-2%. Credit growth actually shrank or went negative in some quarters, the Niti Vice Chairman said.
He denied that slowing of growth rate in the post demonetisation period was due to the decision on note ban. Kumar instead said that the slowdown was the continuation of the declining trend in the growth rate.
“The growth rate was declining quarter after quarter even before demonetisation. Starting from the last quarter of 2015-16, the growth rate had come down for six consecutive quarters,” he said adding there was no evidence to show any connection between demonetisation and slowdown in the economy.
“This is a completely false narrative and I am afraid that leading people like Mr (P) Chidambaram and our former PM (Manmohan Singh) added to this,” Kumar said.
Post demonetisation, India's economic growth slowed to 6.1% in the fourth quarter of 2016-17 and thereafter 5.7% in the first quarter of 2017-18.
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