“I served just over eight months in the previous Congress government and 26 months under BJP Government. I spent more term BJP government,” said Rajan
New Delhi: Former RBI Governor Raghuram Rajan has hit out at Finance Minister Nirmala Sitharaman for her criticism that it was during the era of Former PM Manmohan Singh and Raghuram Rajan that the banks saw their “worst phase”. Rajan in response reminded her that he spent two-third of his tenure under the BJP government.
“I served just over eight months in the previous Congress government and 26 months under BJP Government. I spent more term under the BJP government,” said Rajan.
Rajan was asked about Sitharaman’s statement in New York where she said that India witnessed the worst phase in public sector banks under the leadership of Prime Minister Manmohan Singh and Rajan.
The former RBI governor said that he does not want to get into a political debate. “Let me not get into politics back and forth. The reality is, that clean-up that we started, which is underway, which needs to be completed fast. The recapitalization has been done, but it also has to be done in the non-bank financial sector which is ceasing up and you need to clean-up, get the financial system going again if you want stronger growth,” Rajan added.
Next-gen reforms needed
Rajan said the country needs a new generation of reforms to accelerate economic growth. At a 5% GDP growth rate, India was witnessing a substantial economic slowdown.
Rajan also said that the seeds of the problems were sown in “euphoria” in the pre-2008 global financial crisis. “A lot of investments were made and those slowed down. Those created the bad loans which we needed to clean up. And we started the process of cleaning up,”.
“There are people who say why did we clean up, we could have gone on. We simply couldn’t have gone on because banks were stopping lending because their balance sheets were getting clogged with non-performing loans. So, you had to force the reorganization and recapitalization to set them back on track,” he added.
Banks saw “Worst Phase”
Nirmala Sitharaman has retorted saying that Banks saw the worst phase during Manmohan Singh-led UPA government. She said that a massive amount of bad loans mounted on the public sector banks during the tenure of Dr Manmohan Singh as India’s Prime Minister. Sitharaman pointed out that the “Combination” of former PM of India Dr Manmohan Singh and former governor of RBI Dr Raghuram Rajan made the banks endure their “Worst Phase”.
Nirmala Sitharaman was speaking at Columbia University’s School of International and Public Affairs
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