Former RBI governor Duvvuri Subbarao has called the recently announced merger of Public Sector Banks (PSBs) a “needless distraction”, saying that the move would not arrest the economic slowdown that it was meant to tackle.
Writing in The Indian Express, Subbarao says the mergers will have no short-term effect towards bringing about a turnaround in the economy, and that long term, it could lead to a situation where the banks become “too big to fail” prompting a government bailout along the lines of what happened in the United States during the Great Recession.
Subbarao also argued against the presence of government in PSBs, suggesting that the government prepare a roadmap to sell its majority stake in the same.
As RBI governor between 2008 and 2013, Duvvuri was known for his differences with the government over monetary policy, refusing to bend to then finance minister P. Chidambaram’s pressure to lower interest rates, as inflation at the time was in double-digits.
Of late, he has been an outspoken critic of the government’s monetary policy, calling the transfer of Rs 1.76 lakh crore of surplus to the government a “raid” and calling the December 2018 resignation of former RBI governor Urjit Patel a “strong message” to the government that it should respect the RBI’s autonomy. In a 2016 interview with Livemint, Subbarao has regretted inaction on the RBI’s part against the problem of non-performing assets, which grew under his watch.
