PSU Watch logo

| NRL inks pipeline ‘Right to Use’ sharing agreement with IGGL |   | To avert coal, power crisis in future, India mulls strategic coal & gas reserves |   | India's Foreign Exchange Reserves rises $1.49 Billion to touch $641 Billion |   | Cost of energy should not outstrip paying capacity of consuming nations: Hardeep Singh Puri |   | India successfully flight-tests High-Speed Expendable Aerial Target drone 'Abhyas' |   | States asked to align emission reduction targets with Centre, form BEE-like institutions |  

RBI looked the other way as UPA govt pushed banks to lend indiscriminately: Jaitley

The remarks were seen as a veiled reference to the RBI which is trying to resist the government pressure to relax its policies and reduce its powers

New Delhi: Days after RBI Deputy Governor Viral Acharya warned against the perils of undermining the independence and autonomy of the central bank, Finance Minister Arun Jaitley launched an offensive. In his strongest criticism of the RBI till date, Jaitley hit out against the central bank for failing to check indiscriminate lending during the UPA II regime, between 2008 and 2014, and held the bank responsible for the NPA crisis that infects the banking industry.

“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 remarks were seen as a veiled reference to the RBI which is trying to resist the government pressure to relax its policies and reduce its powers. The RBI has been vocal about acting tough with a list of 11 banks that have large amounts of NPAs, whereas the government wants it to go easy.

‘Total bank credit went up during UPA regime’

“I am surprised that at that time the government looked the other way, the banks looked the other way. I don’t know what the central bank was doing (because) it was the regulator of these. They kept pushing the truth under the carpet,” the finance minister said. Jaitley also said that indiscriminate lending by banks between 2008 and 2014 resulted in the credit growth shooting up to 31 percent in a year from the normal average of 14 percent. He contended that banks, at the time, put their money into projects of demerit which did not have the capacity to sustain the capital. “Total bank credit in India from Rs 18 trillion in 2008, by 2014 went up to Rs 55 trillion. And this is something the banks couldn't sustain, the borrowers couldn't sustain and you had the NPA problem,” he said.

‘NPAs rose between 2008 and 2014’

The minister also said that the non-performing assets (NPAs), that were pegged to be at Rs 2.5 trillion during those times were actually of the order of Rs 8.5 trillion, as was found during an asset quality review conducted by the present regime in 2014. Neither the finance ministry nor Jaitley has so far responded officially to the comments made by RBI’s Acharya. During the speech, he made no reference to Acharya’s lecture or the reports of mounting tension between the RBI and the government.