The strident message sent out to the Narendra Modi government by the deputy governor of the Reserve Bank of India, Viral Acharya, to stay off RBI’s turf, comes on the heels of the Modi government treading on the turf of several autonomous institutions. Whether it was the Central Vigilance Commission earlier or the more recent ongoing spat following the government suspending the top two chiefs of the Central Bureau of Investigation and putting its own man there, the Modi government has been hollowing out or eroding the powers of all the autonomous institutions in the country. Prior to this, it has not even left educational institutions politically untouched. That there is also a big dose of politics in the ongoing tussle between the government and the central banker cannot be overlooked, following the recent inclusion of a Sangh parivar ideologue as its nominee on the RBI’s board.
The immediate issue raised by this nominee is that the RBI is not releasing enough liquidity into the banking sector, and this is leading to hardship, particularly among the medium, small and micro sectors that are the backbone of the economy. Whilst there is some truth in this, it is worth recalling here that it was the government’s foolhardy, misguided demonetisation of high value currency notes of '1,000 and '500 and the half-baked introduction of the Goods and Services Tax that led to economic havoc, which resulted in the loss of millions of jobs. It is not easy to replace these jobs. According to one report, 35 lakh jobs were lost due to demonetisation and several lakh small units were shut down due to the GST.
The government is also peeved that the banks have become less forbearing in tackling non-performing assets. The banks must be commended for this as the bulk of the major defaulters or those who owe banks huge loan repayments are the big corporates. The RBI must share the blame as it was negligent in its oversight. Its representatives on bank boards were sleeping on their watch.
It is puzzling as to why the government would protect these well-heeled defaulters or corporates who don’t want to repay loans. One of them close to the corridors of power owes over Rs 20,000 crore and he continues to enjoy VVIP patronage till today. Corporate entities account for Rs 9.5 lakh crore in non-performing assets or 12.6 per cent of all bank loans in India, as of June 2017. It is little wonder that all these nefarious activities going on under the nose of the government has earned it the sobriquet of suit-boot ki sarkar. Another contentious issue is the transfer of surplus funds to the government. With the government’s newest nominee on the board now pushing its interests and agendas, it seems like the government would like to use the RBI as its piggy-bank to be broken when required. This should be of serious concern to people of India.
