Public shaming of defaulters not wise, can hurt biz: Rajan

Moneycontrol BureauThe ongoing non-performing assets (NPA) crisis has given rise to the popular sentiment that bankers and industry executives should be hauled over the coals.But Reserve Bank of India Governor Raghuram Rajan had a slightly nuanced take on the subject, saying the public should not look at the subject of bank defaults "with the 20:20 vision that hindsight offers" and must evaluate lending decisions as they were taken then.Speaking at the post monetary policy review press conference, Rajan took on the question of grounded airline Kingfisher and said calls to publicly name and shame defaulters must be resisted."The RBI offers banks principles on when a loan should be considered an NPA and when it should be given some forbearance and considered a standard loan," he said."At a time when the economy was getting into trouble, the RBI gave forbearance based on requests from banks and industries," he said, adding that even in the case of Kingfisher, banks took a call on whether the airline industry would recover or not.The central bank said it was important to keep in the context the loan was made then.On the question of whether state-run banks should make public lists of defaulters, Rajan made it clear that there was a difference between a wilful defaulter and someone who defaults due to circumstances beyond their control."If someone defaults on their credit card bill, would they like it if their names were made public," he asked, saying that some business defaults take place due to a variety of external reasons."Releasing names may create a loss to business and restrain promoters from taking risks in the fear of public shaming," he said.Watch video for the complete interaction.