Rajan says bad loan issue getting loaded with morality

With non-bailable warrants being issued against liquor baron Vijay Mallya for siphoning off money from a bank loan and a larger controversy raging in India over loan defaults by corporates, RBI governor Raghuram Rajan has said the issue of bad loans gets "loaded with a lot of morality" and it is necessary to keep criminal liability separate for putting the stressed assets back on track.

"What's happening on the NPA front...this becomes loaded with a lot of morality, are these good people, bad people. I think one should take out the morality from the NPA clean-up," he said delivering the inaugural Kotak family distinguished lecture at Columbia Law School here on Monday.

The Reserve Bank governor said the NPA clean-up is simply about whether the loan is "performing or not performing. It may have become non-performing simply because you had terrible luck or somebody else's fault. Somebody canceled 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".

If companies get into trouble, the loan becomes a non-performing asset and "we very much want these assets to be back on track," he said.

"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," he added.