In a meeting that lasted three-and-a-half hours, Reserve Bank of India Governor Raghuram Rajan did some plain speaking before the Finance Standing Committee of Parliament on the state of economy, reforms and restructuring of RBI, challenges in the banking sector and the way forward.

Rajan told the panel headed by veteran Congress MP M Veerappa Moily, that the rich and influential take most of the benefits of loopholes in the country’s banking system.

When one of the members asked about the recovery of agriculture-related loans and the burgeoning non-performing assets (NPAs), Rajan said “we need to correct the system” to help the poor.

NPA menace He told the panel that the NPA menace is far from over. “He wished good luck for those in the system who believe that NPA problem is over,” a member in the panel. The member added that Rajan gave them the details of the steps taken by the RBI to recover bad loans from big corporate houses.

Welcoming the Centre’s decision to constitute a Monetary Policy Committee, Rajan told the panel that getting six more people to share the pressure of running the RBI is indeed a welcome step.

When asked whether MPC will undermine the role of RBI Governor, he said as ex-officio chairman of the MPC, the Governor has the powers for casting vote in case the six-member committee gets divided on any issue.

“He told us that there will be three officers from the RBI. He quipped that if the RBI Governor is not able to convince his deputy governors, then it is a different issue,” another member said.

Term insufficient Rajan also told the panel that the three-year term is insufficient for an RBI Governor. “He said some countries have four-year terms for the chief of central banks, while some have five years. Though he did not make any suggestions, he said the current term of three years is insufficient,” the member added.

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