Restoring the debt contract

Since the subprime crisis first erupted onto the world stage and threatened the entire financial order , a lot of heat and noise was generated in the immediate aftermath relating to steps needed to prevent recurrence of such a problem. I am not too sure if overall we have made any meaningful progress on this topic as news headlines continue warning us of another impending financial crisis in the days to come. It is with this background that I recently came across the Reserve Bank of India's governor's speech at a function on the topic of problems plaguing the banking industry in India.

With its refreshing candour, the RBI governor Dr. Raghuram Rajan has rightly pointed out the specific issues that need attention (reduced sanctity of debt contracts) as well as some suggested corrective measures. In his speech the governor has, rightly in my opinion, dismissed the concept of 'Regulatory Forbearance' as extremely myopic and futile. Read the entire speech through the link given below and let me know your thoughts on the same.

http://www.outlookindia.com/article/We-Need-A-Change-In-Mind-Set/292696