Former Chief Economic Adviser Arvind Subramanian said it is important to protect the Reserve Bank of India’s (RBI) autonomy and there must be open technical discussions on issues in the present context.
‘No politicising’
“I want to convey that preserving the integrity, autonomy and independence of RBI, which is one of India’s few legitimately strong institutions, is very important, and its sanctity needs to be preserved. No attempt to politicise the board or other things should be allowed,” he said in a conversation with T.V. Somanathan, Additional Chief Secretary, Government of Tamil Nadu, at an event here on Wednesday.
The occasion was the launch of Dr. Subramanian’s book titled ‘Of Counsel: The Challenges of the Modi-Jaitley Economy’. While lauding the central bank for its track record, he pointed out that it had performed poorly in the last 15 years in terms of NPA management and other regulations.
Drawing the attention to contents in his book, the former chief economic advisor said some credible analysts had been saying since 2011 that NPA problems in the banking sector were huge. But RBI was seriously underestimating the magnitude of NPA problems in their reports.
“In all, the independence of the RBI should be protected. It also has a track record of regulatory failures that have to be addressed at the same time,” he said.
“I think RBI can no longer say ‘leave it to us, we will solve the problem’,” Dr. Subramanian said.
He also pointed out that there has been no technical discussion on RBI reserves, which would have set the context.
“Even though RBI is over-capitalised, it should not be used for financing the deficit, expenditure, etc. The excess capital must only be used in targeted areas to solve the twin balance sheet problems and certain other purposes, which would add to long-term growth of the economy,” the former CEA added.
He also felt that recapitalisation should happen only if the government was willing to reform the public sector banks.