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Calling the IT & FS crisis a failure of regulation, former chief economic advisor to Finance Minister Arvind Subramanian said the Reserve Bank should be held accountable for the crisis in the country. one of the largest entities it regulates.
forthcoming book, "Of Counsel: The Challenges of the Modi-Jaitley Economy", says Subramanian, although RBI enjoys a good reputation, that does not mean that he's always right, because for years, the RBI has not been able to grasp the seriousness of the loan repayment problems or identify the protracted frauds of Nirav Modi and his ilk.
"Now, with the revelation of recent shenanigans involving IL & FS, this failure seems to have affected not only commercial banks, but also non-bank financial corporations.In case of failure, the RBI must be held for responsible, "he explains in the book published by Penguin Random House India.
The book will be launched for the first time in Mumbai on December 7th, then in Delhi on the 9th.
Subrama nian calls on RBI to strengthen his skills in two key areas of supervision and to part with his huge reserves for fundamentally recapitalize troubled, government-run lenders.
"RBI must truly strengthen its supervisory capacity, or even be willing to entrust this task to a new agency created for that purpose." A second area is to recapitalize the public sector banks decisively, by setting them up for they can lend again, "he said.
Subramanian expressed this view in a 2018 economic study in which he called the RBI's excess reserves, including foreign exchange reserves, and his huge reserve capital of Rs. 9,700 billion for more purposes. productive.
"The RBI has a capital surplus that can be used profitably for this purpose against all the current and former senior RBI officials, who claim that the RBI needs all the capital it needs.
"These officials impose the respect of the public, and for good reasons. But I think they're wrong, "he says, and quotes the late British Prime Minister Margaret Thatcher who said," A man and the truth are a majority. "
Although he criticizes the crisis of the central bank about the crisis of the IT & FS, he congratulates the monetary authority for some of its recent stage This is the case of reviewing the quality of badets and opening the doors of private sector bank managers.
The RBI has done an excellent job of maintaining macroeconomic and financial stability, thanks to its illustrious governors and the strong team they lead, he said. quotes the RBI's 2015 decision to launch an badet quality review, which has had a significant impact on the resolution of the double balance sheet problem.
"More recently, the RBI has imposed a certain discipline on the most troubled banks in the public sector via the framework of rapid corrective measures," he notes and describes the decision of ICICI Bank, Axis. Bank and Yes Bank's "impressive actions to render accounts and ensure their exit."
"Due to the strong track record of the RBI, it has become one of the country's key public institutions such as the Electoral Commission, the Finance Commission and the Supreme Court, pillars of the nation that research has repeatedly deemed essential for long-term economic development ",
The former AEC also calls for A radical solution to the double balance sheet problem and proposes to privatize public sector banks by modifying the law on the nationalization of banks as an effective means of achieving this
. not having an effective mechanism to solve the problem of the NPA and called for the creation of a bad bank as a way to progress.
"Until now, the strategy has been to solve the double balance sheet problem by a decentralized approach, the banks have been charged with the restructuring, but in the current circumstances, the efficiency has been reduced. proved difficult to reach, as the banks were overwhelmed by the scale of the problem they faced, "he said.
Therefore, he said "it may be time to try a centralized approach, or a public sector badet rehabilitation agency." So far, public debate on the problem of bad debts focused on bank capital, as if the main obstacle to solving the TBS problem was to find the funds that the public sector banks needed. "
Subramanian was the chief economic adviser of October. From 2014 to June 2018, citing pressing family obligations, he returned to the United States and, in 2017, his term was extended for one year.
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