Old Pension Scheme: Many states have implemented the old pension scheme, do you know what Raghuram Rajan said on this?

Why NPS was adopted

In an interview to an online portal on the sidelines of the World Economic Forum in Davos, Rajan said the new pension scheme was adopted because the old scheme had huge liabilities. He further said that it is easier for governments to adopt defined benefit plans as liabilities are not being recognized. Many state governments like Rajasthan, Chhattisgarh and Punjab have adopted the old pension scheme, including Himachal Pradesh.

implement the plan effectively

Rajan further said in the interview that though it is for each state government to decide. But, these schemes should be effectively targeted towards the weaker sections of the society. This is so that they can get benefit. His comment is like a mirror for those state governments who want to implement or have done the old pension scheme once again.

Banks also warned

The former RBI governor also cautioned Indian banks against their shift towards retail lending during the interview. He had said that there could be potential risks in case of recession. Rajan’s comments come at a time when Indian banks have seen a huge jump in retail assets as compared to wholesale loans. In the interview, he was quoted as saying that banks should examine all the risks involved in giving infrastructure loans. The former banker said that between 2007 and 2009, the RBI moved towards infrastructure loans, though problems cropped up later.

(With inputs from IANS)