PM Modi in contrast Urjit Patel to ‘snake who sits on hoard of money’: Ex-Finance Secy | India Information

“He (Patel) offered some recommendations—all for the government to take and nothing for RBI to do, besides what it had been doing already,” the previous finance secretary stated, including that “his assessment appeared to be that the RBI was not on top of the situation” and was unwilling to do something significant to deal with the financial state of affairs and resolve its variations with the federal government.

“At that stage, the PM lost his cool and took on Urjit Patel. I saw him in such an angry mood for the first time. He compared Urjit Patel to the snake who sits over a hoard of money, for being unreceptive to putting RBI’s accumulated reserves to any use,” Garg wrote in a chapter ‘Governor Urjit Patel Resigns’, which captures the circumstances that preceded the resignation of Patel.

“He did some serious tough talking. He brought up many subjects where RBI’s intransigence was hurting India. He also brought up the subject of the surplus retained… He conveyed to Urjit Patel as emphatically as a PM, without issuing directions, to convene a meeting of the board and find solutions for the issues in consultation with Arun Jaitley and the finance team,” Garg stated in his ebook.

One of the contentious points between the RBI and the federal government was the excess switch of the RBI. “In the board meeting of RBI on August 10, 2017, the first meeting I attended as the RBI Board member, proposed the retention of Rs 13,400 crore of the RBI surplus of Rs 44,200 crore for financial year 2016–17,” Garg wrote. The RBI had communicated that roughly Rs 30,000 crore can be available for switch as surplus to the federal government for the 12 months 2016–17. Garg stated he had requested for 100 per cent of surplus to be transferred to the Government of India on the traces of earlier years.

The authorities’s frustration with Urjit Patel began on February 12, 2018 when he had come out with a particularly straitjacketed formulation for coping with the non-performing loans of the banking sector and taking these defaulters for decision beneath the IBC (Insolvency and Bankruptcy Code), Garg wrote. Patel finally resigned because the RBI Governor on December 10, 2018, over coverage variations with the federal government.

According to Garg, within the assembly convened by the PM on September 14, Urjit Patel made a presentation, the place his analysis was much more alarmist than the prevailing financial state of affairs, and painted a horrible image. Some of the ideas Patel gave included, scrapping of long-term capital positive aspects (LTCG) tax, large scaling-up of disinvestment targets, persuading multilateral establishments to put money into authorities bonds and proposed to pay up and proposed that the federal government pay up the pending payments of a number of corporations, together with MSMEs, which, in his judgement, amounted to hundreds of crores.

RBI’s February 12 round, a very good transfer for the decision of non-performing loans on the whole, created monumental problem for banks with regard to the loans given to power-sector corporations. On a petition by power-sector builders, the Allahabad High Court directed the federal government to invoke Section 7 of the RBI Act, which supplied for the federal government to concern ‘directions’ to the RBI governor, after session with the governor.

“RBI decided not to work with the government on this. It did not attend the meetings of a committee constituted under the chairmanship of the cabinet secretary to find solutions to the issue,” Garg claimed.

On March 14, 2018, Patel, in a scathing speech delivered on the Centre for Law & Economics at Gujarat National Law University in Gandhinagar, questioned the federal government’s incapability to shed regulatory authority over nationalized banks, leaving RBI with insufficient regulatory authority over the general public sector banks (PSBs) in comparison with private-sector banks. In June 2018, Patel raised the repo price to six.25 per cent, as a result of a possible rise in inflationary pressures to the federal government’s resolution to hike minimal assist costs. This was adopted up by one other hike of 25 foundation factors in August 2018.

The RBI had additionally put as many as eight PSBs beneath the PCA framework, rendering them unable to lend, Garg wrote, including that stress was building on the federal government to place extra capital in banks to the tune of lakhs of crores. On the problem of electoral bonds, Garg stated, Patel, after initially agreeing to the proposal of the scheme, wrote to Finance Minister Arun Jaitey, questioning the issuances of bonds by anyone/financial institution apart from RBI. He additionally proposed that the bonds be issued in digital, not bodily mode, Garg stated.

This is the second ebook of Garg. The title of his earlier ebook is ‘The $10 Trillion Dream’.