NEW DELHI: Amid reports of tensions between the Centre and the central bank over a host of issues, former RBI governor Raghuram Rajan has suggested that the RBI board needs to play like Rahul Dravid, also called “Mr. Dependable”, and “certainly” not like Navjot Singh Sidhu, a cricketer turned politician known for his “loud” comments.
In an interview with a news channel, Rajan said “Both sides have to listen to each other and respect each one’s turf. What is more worrisome is the change in the role played by the RBI board in all this. RBI board is not an operational board, it is not led by professionals supervisors or central bankers. These are people from all the different box in life whose main role is to advise people, to council … to play a Rahul Dravid, to coach in some sense. But not to make operational decisions and certainly not be loud like (Navjot Singh) Sidhu.”
Rajan further said that “I’m very worried about the change in it as they (RBI board members) are supposed to be the wise people who bridge differences, rather than force greater ones. We’ve had excellent people on its board and there are still very good people on those boards. So I would hope that they would come together to bridge these differences and reduce some of the noise that is coming. I don’t think India should have a breakdown in the dialogue between the central bank and government.”
On disclosure of wilful defaulters’ names, Rajan said “Issue of fraud is not necessarily the same as willful defaulter. Wilful defaulter doesn’t want to pay but hasn’t run away with the money. Full arm of law should be applied to bring frauds to book, it’s work in progress.”
On the issue of making the list of defaulters public, Rajan said that he is “not well-versed to understand why those names can’t be made public”.
“If frauds go by unpunished, it simply encourages more fraud. If there is a sense that there is no place on earth where you can hide because the long-arm of the Indian law will come after you, I think it will send a very sound message,” he said.
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On lending for small businesses, he stated that MSMEs (micro, small and medium enterprises) are hard to lend to, which is why they are always clamouring for more funds. The right way to give improve the credit process but not relax the credit standards. Right way to get funds to MSMEs is by improving business environment they operate in. The worry is that Mudra loans NPA are far bigger than we think.”
On supervision of public sector banks, Rajan said, “There is room for improvement in all sides on the governance of banks, both in the public sector and the private sector, and recognise the level of NPAs.”
Commenting on whether the PCA (Prompt Corrective Action) norms be relaxed or not, he said, “Basel norms are flexible for some conditions but very stringent versus other Indian rules. RBI as a professional institution must be trusted for putting 11 banks under PCA.”
tensions between the government and the Reserve Bank
+ came to the fore last month after a scathing speech by a top RBI official blew the lid off a fractious dispute between the bank and the government of Prime Minister Narendra Modi on issues ranging from lending curbs, more cash availability to the non banking finance companies (NBFCs) to who controls the institution’s reserves.
That speech by RBI deputy governor Viral Acharya roiled markets and prompted the government to issue a statement in support of the central bank’s autonomy. Many viewed Acharya’s comments as a sign that the RBI was pushing back hard against government pressure to relax its policies and reduce its powers ahead of a general election due by May.