Lighter Touch Regulatory Requirement - Rajiv Kumar

7 May 2018: The resolution of bad loans via bankruptcy courts would help banks improve recovery, said Rajiv Kumar while suggesting that the RBI should move towards having “lighter touch regulatory requirement”. The economy is on the cusp of a major change and is about to witness growth which will be sustained, high, clean and hugely inclusive, said Niti Aayog Vice Chairman Rajiv Kumar. It will be completely different, a complete removal from any five-year plan because the focus of the five-year plan was on the allocation of resources.
 
The government has taken some major steps to resolve the issues. The bankruptcy law is a major step because so far there was no instrumentality, no process with which private borrowers could be held responsible or asked to share the downside risks of the projects or the NPAs.  It has brought in new rules of the game into the business and all the future borrowers will be more careful and borrowing will not be wild in future. 
 
The RBI also may want to re-look at how much micro-regulation it wants to undertake, or can it have a lighter touch regulatory requirement so that the cost of compliance is reduced. Not lesser regulation. To see the sector mature in future, we would want to have all the prudential regulatory norms but handle it may be with a lighter touch. For the first time, the promoters are sharing the downside risks in their projects, otherwise all this while the entire downside risk was the banks. 
 
The promoters need to understand that they have to share the risks, both downside, and upside, and the banks should have the option to get the least haircut by putting assets out to those who want to manage it. Some of the strongest indicators, heavy and medium commercial vehicles sales, tractors, steel, aviation – are showing significant growth. In short, so much work has been done, that it is yet to fertilize but now it will fructify. We are on the cusp of a major change and it will be sustained, high, clean and hugely inclusive. This is why when the Prime Minister talks about a New India 2022, it’s not just speech. We can expect to see a New India by that time.