Reserve Bank of India – Modi Govt Accessing Reserve Funds
Shaktikanta Das is the new Governor of the Reserve Bank of India, which regulates the monetary policies of India. He has been appointed by the Narendra Modi Government in the seat vacated by Mr. Urjit Patel who resigned his job following differences with the Government. Das was very vocal during the demonetization days. He had said that the government would install CCTVs in the banks and would catch those who were found exchanging huge amounts of black money. He is an MA in History from St. Stephen’s College, Delhi, and had followed it up with an advanced Financial Management course from IIM-Bangalore.
The RBI is an autonomous body which need not follow the Government’s directives. But there is a Section 7 under which the Government could advise it on certain measures.
The Reserve Bank of India is called ‘Reserve’ as it has certain amount of money which always lies in reserved category. Even during the most critical periods like wars with Pakistan and China, these reserves were not taken out. Even during the prime ministership of Mr. Chandra Shekhar, this money was not touched even though the Government had to mortgage its gold reserves with the IMF. Now the Government wants to use this money to pass it on to the banks to be extended as loans to industrialists who have defaulted on payment of their old debts. A deputy governor of RBI indicated this and warned against tampering with the reserves.
Already huge money has gone into bad debts and into building Non-Performing Assets (NPAs) of the scheduled banks. Most of this money was given to the industrialists as loans and is not likely to come back. It has not been written off. The game now is to give further loans to the very same debtors who have proved defaulters. What it means in economic terms is that good money is being deployed to change the bad money.
The NPAs of the nationalized banks stood at Rs. 3,23,464 crore. These were extended as loans to companies owned by Ambanis, Adanis, Ruia Brothers etc. The rationale being trotted out is that in order to retrieve the bad debts, more loans are being given. It was at this point that the former Governor Urjit Patel and Finance Minister Arun Jaitley fell afoul of each other and Patel resigned and left.
Govt wants to apply section 7 of the RBI rules in this regard. The NPAs now have gone up to Rs. 10,35,00,528 crore as on March 31 this year. The reserved funds with the RBI was Rs. 9,060 lakh crores. The Government wants the RBI to use about Rs. 3,600 crore to industrialists to prop up these defaulters. We need to think if the Government is on right track in doing this?
(source: Transcribed from Jan Gan Man ki Baat thewire.urdu)