Raghuram Rajan defends RBI deputy governor against Modi government’s interference


Former RBI Governor Raghuram Rajan has said that India needed to respect the autonomy of the Reserve Bank adding that it was in the interest of the country. Speaking to CNBC-TV18, Rajan also slammed his critics for being seemingly confused on the kind of regulation they liked.

“If on the other hand we tailor it to Indian conditions, we are asked why you don’t tailor it to Western conditions. I think you cannot pick and choose which regulation you like and which regulation you don’t,” he said.

Rajan’s comments on the institutional autonomy of the RBI came just days after the Centre’s Narendra Modi government was accused of trampling upon the freedom of the country’s federal bank, Rajan said.

The Modi government had refused to give Rajan a second term as the RBI governor in 2016. The government had then appointed Urjit Patel as his successor. According to recent reports, Patel had threatened to resign following serious differences with the central government.

The rift between the RBI and the Modi government turned ugly after Patel’s deputy, Viral Acharya, said last week that attempts to undermine the central bank’s autonomy could prove to be ‘potentially catastrophic.’

What inflamed the tension further was the statement by Union Finance Minister Arun Jaitley, who blamed the central bank for failing to stop a lending spree during 2008-2014 that left banks with $150 billion of bad bank loans.

Rajan said, “Once you have appointed these deputy governors and governor, you have to listen to them because that is what you have appointed them for … they are your safety belt.”

Congress President Rahul Gandhi on Tuesday had urged the Governor of the Reserve Bank of India, Urjit Patel to stand up to Prime Minister Narendra Modi to ‘protect the nation.’ This was after it emerged that the Modi government had asked for Rs 3.6 lakh crore from the RBI to fix the economy.