Rajan's note to Parliamentary Panel: A larger number of bad loans were originated in the period 2006-2008 when economic growth was strong, and previous infrastructure projects such as power plants had been completed on time and within budget.   


"It is at such times that banks make mistakes. They extrapolate past growth and performance to the future. So, they are willing to accept higher leverage in projects, and less promoter equity. Indeed, sometimes banks signed up to lend based on project reports by the promoter's investment bank, without doing their own due diligence," he said.   


Unfortunately, he said, that growth does not always take place as expected and the years of strong global growth before the global financial crisis were followed by a slowdown, which extended even to India, showing how much more integrated the country had become with the world.   


Strong demand projections for various projects were shown to be increasingly unrealistic as domestic demand slowed down, he said.  -- PTI