RBI did not check reckless lending by banks: Jaitley
New Delhi: Finance Minister Arun Jaitley Tuesday criticised the Reserve Bank of India for failing to check indiscriminate lending during 2008 and 2014 that has led to the existing bad loan or NPA crisis in the banking industry.
The remarks came amid reports of mounting tension between the finance ministry and the RBI over the autonomy of monetary policymakers.
RBI Deputy Governor Viral V 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 RBI pushing back hard against government pressure to relax its policies and reduce its powers.
"You see (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 India Leadership Summit organised by US-India Strategic Partnership Forum. "The central bank looked the other way, there was indiscriminate lending," he 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 per cent from the normal average of 14 per cent.