Without criticising the government or the Finance Ministry, RBI governor Urjit Patel on Tuesday strongly defended the autonomy of the country's central bank in his deposition before the Standing Committee on Finance led by Congress MP Veerappa Moily. Patel sought 10 days to give a written reply to the parliamentary panel on controversial issues including the prospect of the government invoking Section 7 of the RBI Act.
According to the Economic Times, Patel also assured members that he would provide details of non-performing assets (NPA) of various banks. However, some members claimed that the RBI governor assured the panel that the NPA levels were not disturbing.
Patel’s statement came amidst differences between the RBI and finance ministry on reducing norms on liquidity supply in the credit markets.
He also assured that the central bank’s autonomy was essential to protect the interests of depositors and maintain the credibility of the Indian economy before the international rating agencies.
The parliamentary panel which included former Prime Minister Dr. Manmohan Singh also had Rajya Sabha MP Digvijaya Singh, BJD leader Bhartruhari Mahtab and Dinesh Tripathi along with BJP MPs Nishikant Dubey and Shivkumar C Udasi.
When asked by BJP parliamentarians why he was keen in fulfilling the Basel-III norms, the RBI governor said compliance would fulfil a commitment to the G20.
With reference to his book “Between Debt and the Devil”, Dubey asserted that the RBI must help the government in difficult times and a committee appointed by the UPA regime had stressed on a bigger role for the Union Finance Ministry with respect to RBI and market regulator the Securities and Exchange Board of India (SEBI) to resolve such issues. He also stated that the fiscal debt could be checked via printing more notes.
Speaking on the effect of demonetisation on the economy, the governor claimed that it had a transient impact with credit growth at 15 per cent, inflation having come down to 4 per cent and cash to GDP ratio also improving.
Patel also projected a positive result for the country’s economy due to the reduction in international crude oil prices.
The committee, which stated that it may call the RBI governor again after reading his written response, has been divided on the issue of demonetization. The BJP members had recently stopped Moily from coming up with a report on the issue.
Differences cropped up between the RBI and the finance ministry over issues like easing of loans for small and medium ventures and proper size of the central bank’s reserves. In addition, many Indian banks are under debts of bad loans to the RBI.
(with PTI inputs)