RBI can do better to boost growth, feels the government

Urjit Patel, the governor of the Reserve Bank of India, seems to have started getting into the bad books of the government within a year of his appointment.

While the government had expected that Patel would help in the effort to accelerate economic growth by lowering interest rates and adopting other revival measures, it feels that he has not done enough.

Other than a 25-basis point reduction soon after taking charge, Patel has not made any changes in rates.

However, unlike his predecessors, Patel can’t solely decide the interest rates since he now shares the responsibility with the Monetary Policy Committee (MPC) that he heads.

The committee also has two other RBI representatives and three government nominees.

Even then, an influential section from the government likes to believe that the RBI has not thought enough about high interest rates and is reluctant to make use of whatever the comfortable fiscal situation and inflation has provided.

The government has even been vocal about its disappointment over MPC and its procedures, including the three officials that it had nominated.

However, interest rates are not the only reasons of the government’s disappointment. It is also frustrated over the RBI's stonewalling of attempts of power and transport ministries to revive stalled projects through a package of measures.

"It is not even willing to listen to the concerns of government departments," a senior central government official told TOI.

RBI is also said to be be moving slowly on deciding measures for the growing non-performing assets (NPAs), something for which even banks have been critical of.

Government’s contention with RBI first started over the manner in which it handled the Election Commission's request to allow higher cash withdrawal for assembly elections candidates in Uttar Pradesh and four other states, to which RBI had said no.

Lower interest rates go hand in hand with the continuing low appetite for loans, which is partly because of weak financials of several companies that are stuck with stalled projects and sticky loans.

Ironically, Patel is raising more eyebrows than his predecessor Raghuram Rajan, who was often considered to be not influenced by the government's concerns.