Finance Minister Arun Jaitley with RBI Governor Urjit Patel and SEBI Chairperson Ajay Tyagi at the Finance Ministry in New Delhi. (PTI)

Arun Jaitley Criticises RBI For Indiscriminate Lending By Banks

Finance Minister Arun Jaitley today criticised the central bank for failing to check indiscriminate lending between 2008 and 2014 that led to the present bad loan crisis in the banking sector.

“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 the India Leadership Summit organised by the U.S.-India Strategic Partnership Forum. The remarks came amid reports of mounting tension between the Finance Ministry and the Reserve Bank of India over the autonomy of monetary policy makers.

RBI Deputy Governor Viral Acharya in a speech on Friday stated that undermining the central bank’s independence could be “potentially catastrophic”. This was seen as a veiled reference to the RBI pushing back hard against government pressure to relax its policies and reduce its powers.

“The central bank looked the other way, there was indiscriminate lending,” Jaitley said said. The government of the day, he said, was pushing banks to lend which resulted in credit growth in a year shooting up to 31 percent from the normal average of 14 percent.

Also read: India Central Bank Chief Meets Jaitley as Rift Widens

Jaitley, who had previously stated that politicians have to unfairly take the blame for any wrongdoing while supervisors get away relatively easy, didn't refer to Acharya’s speech or the reported tension between his ministry and RBI during his comments at the event today.

He said reforms undertaken by the government have led to significant improvement in revenues. “My own estimation is that from 2014 to 2019, we will be almost very close to doubling our tax base.” This has been possible because of formalisation of the economy that demonetisation brought about, the new indirect tax structure and improvement in indirect tax structure without raising rates, Jaitley said.

According to the finance minister, India had 3.8 crore income tax filers when the BJP government took office in 2014 and that number has since grown. “In four years, it has already moved up to about 6.8 crore. This year, I am sure it will be very close to 7.5-7.6 crore which is almost double.”

“I think the whole concept of governance has seen a sea change,” he said, adding that corporate leaders no longer visit the corridors of power because approvals are available online and discretion in the allocation of natural resources like coal mines or spectrum has been eliminated.

Also read: Government Versus RBI: Dissent At The Podium