Former RBI governor Raghuram Rajan recalled having an amicable relationship with the government during his tenure as RBI governor — irrespective of the party in power. The former top official also recalled a conversation with then Finance Minister Arun Jaitley where he was given the green signal to “clean up” the system after bad loans “tumbled out” during an asset quality review in 2015.
“In my time we had plenty of cooperation with the government. Though I was an outsider…we talked…the Finance Minister and I on every major policy issue — whether the Finance Minister was from the Congress or the Finance Minister from the BJP — and we reached agreement. The issue was never policy,” he told The Print during the interaction.
Raghuram Rajan served as Reserve Bank of India Governor between 2013 and 2016 — spanning both the Congress-led UPA and the subsequent BJP-led NDA Central governments.
Rajan also recalled the build-up of non-performing assets in the books of various Indian banks in the 2010s — amplified by corruption, delayed planning permits, land and environmental clearances, and more. Then Finance Minister Arun Jaitley had told the former RBI governor to “go ahead” and overhaul the system as necessary.
“I said we need to clean up otherwise these banks are not going to be able to lend more. Their band sheets are clogged with bad loans…they don't want to make any good loans. So the asset quality review started. It needed two hands: from our side to recognize the bad loans and from the government's side to capitalize the banks. And so I went to Jaitley and I said: 'Look we're going to have these bad loans. I'm warning you they have to come out. Otherwise they'll just keep the system from actually cleaning up and from lending'. You want the system to push ahead. He said: ‘Fine…go ahead’. And we went ahead did it,” he recalled.
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