The rift between the government and the RBI seems to be coming out into the open, Union Finance Minister Arun Jaitley has now criticised the Reserve Bank of India for failing to check indiscriminate lending during 2008 and 2014 that has led to the present bad loan or NPA crisis in the banking industry.
Few days back , it may be re- called that RBI Deputy Governor Viral V Acharya in a speech on Friday stated that undermining the central bank’s independence could be “potentially catastrophic”. This was seen as a veiled reference to RBI pushing back hard against government pressure to relax its policies and reduce its powers.
“You see (between) 2008 to 2014, after the global economic crisis, to keep the economy artificially going, banks were told open your doors and lend indiscriminately,” Jaitley said at India Leadership Summit organised by US-India Strategic Partnership Forum.
“The central bank looked the other way, there was indiscriminate lending,” he said.
The government of the day, he said, was pushing banks to lend which resulted in credit growth in a year shooting up to 31 percent from the normal average of 14 percent.
Delivering the AD Shroff Memorial Lecture in Mumbai on Friday, Acharya called for greater powers for RBI to regulate public sector banks as it seeks to clean up the banking system. This independence, he said, was necessary to secure greater financial and macroeconomic stability.
Neither finance ministry nor Jaitley has so far responded officially to the comments reported PTI.