Centre vs RBI: With these 7 quotes, Arun Jaitley destroys autonomy call for RBI
The row that has broken out between Centre and the Reserve Bank of India (RBI) over independence of India's central bank has now been ratcheted up to a higher level with the Modi government deploying FM Arun Jaitley who proceeded to blast the cbank for its sins of omission and commission, but restricted himself to a period before the NDA rule. Finance Minister Arun Jaitley blamed the RBI on Tuesday for failing to stop a lending spree between 2008-2014 that caused a debt default crisis at banks, causing NPAs to shoot up. The minister said that lending during that time left banks with huge bad debt. The blame game started after RBI Deputy Governor Viral Acharya said that undermining RBI's independence could be "potentially catastrophic"'. The bone of contention between the government and the RBI is whether the later should part with some of its 3.6 trillion rupees ($48.93 billion) reserves to fund the country`s fiscal deficit.
Loans dispensed by banks grew nearly 20 percent annually on average during 2008-2014. When the RBI in 2016 conducted an asset quality review of the banks, it found that there were $150 billion of non-performing loans, which forced the RBI to impose lending restrictions on some.
Check out Arun Jaitley speech below:
1. Arun Jaitley publicly criticised the RBI on Tuesday, saying the central bank's lax policies had contributed to banks' current woes.
2. Arun Jaitley said that during 2008-14 after the global economic crisis banks were told to open their doors and lend indiscriminately to keep the economy going artificially.
3. Arun Jaitley: "The central bank looked the other way (when) there was indiscriminate lending... Total bank credit in India from Rs 18 lakh crore in 2008 went up to Rs 55 lakh crore by 2014. And this was something that banks couldn't sustain, the borrowers couldn't sustain and you had the NPA problem."
4. Arun Jaitley: "I do not know what the central bank was doing. It was a regulator of these. They kept pushing truth below the carpet."
5. Arun Jaitley said that reforms undertaken by the NDA government have led to significant improvement in functioning and revenues.
6. Arun Jaitley said that the whole concept of governance has seen a sea change, adding that corporate leaders no longer visit corridors of power because approvals are available online. Discretion in the allocation of natural resources like coal mines or spectrum has been eliminated.
7. Arun Jaitley: "And we were told that the total NPA (non-performing assets) was Rs 2.5 lakh crore. But when we did the asset quality review in 2015, with the central bank doing it, we found that the NPA was already Rs 8.5 lakh crore." (All Text Courtesy: PTI and IANS)