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RSS-backed Think Tank holds RBI responsible for India’s slower growth

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New Delhi, Dec 15: The Reserve Bank of India (RBI) is constantly being criticised for its several decisions for not allowing the growth of economy of the country the way it should have been. Differences not only appeared with the government but some of the organizations associated with Rashtriya Swayamsevak Sangh (RSS) and Think Tanks associated with it.

RSS-backed Think Tank holds RBI responsible for India’s slower growth

A report released by Centre for Economic Policy Research (CEPR) suggests that there is a bad debt to the tune of Rs 14 lakh crore with Indian banks eventually squeezing the credit off-take in the economy, especially for infrastructure projects along with micro, small and medium enterprises (MSMEs) leading to a slower growth.

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The report tells that MSMEs in India get only six per cent of bank loans while Organisations for Economic Cooperation and Development's (OECD) average is 46 per cent. So there is an imminent need to increase this to the global average level. Regulatory changes along with corrections in the policy frame work are required to increase the credit outflow to the MSMEs.

There is also a need to understand that foreign investors have steadily been increasing their holding both in private sector banks and in the public sector banks. At present, India does not have one hundred per cent government owned banks. There are public sector banks with a mixed ownership (public and private) and large private sector banks with sizable shareholding.

So the think tank says, this makes the landscape where the India's banking system is predominantly owned by the government followed by foreigners and very small portion of Indian entrepreneurs. There is a need to create large Indian Banking players for which RBI's Diversified Ownership Norms (DON) need to undergo a change.

India aspires to become $10 trillion economy, and if it really wants so, the policy makers and regulators will have to play a productive role to improve the credit off-take. It is indeed essential to define the role of government and public sector banks on one hand and the need for powerful private sector banks in commercial banking segments on the other.

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The role of ownership structure plays to make the banks more meaningful, sustainable and strong. The moot question is, can India create large banks which are equally strong in comparison to their global peers. More importantly, the present ownership and governance are hindrance towards achieving this vision of strong global banks emanating out of India.

The report further says, is current correction pushed by the RBI like implementation of BASEL III norms, strict prompt corrective measures, the stringent implementation of insolvency and bankruptcy code enough. Or do we still need some more course correction? But it has been realized there is a lot needed to be done to make growth even faster.

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