The RBI on Friday said a research paper favouring gradual privatisation of public sector banks (PSBs) is not its view but that of the authors of the report.
The Congress on Saturday accused the Centre of having pressured the RBI to "disown" its research report which argued against a "big bang approach" to privatisation of banks, and demanded that the government come out with a white paper on public sector banks' privatisation.
Party leader Rahul Gandhi said "tanashah's (dictator's) wish is the government's command" and even independent institutions like the RBI, which have been the anchors of India's economic growth, have been forced to bend before the "supreme leader" and the agenda of his "mitron friends" from time to time.
"A well-researched article published by the RBI advocated against hurried privatisation of public sector banks and praised their efficiency. It disturbed the 'tanashah' very much," he said.
"The government sprung into action to restore its supreme leader's peace of mind. The next day, the RBI issued a clarification that it was not against privatisation of banks," Gandhi said.
Public sector banks have acted as shields during crises for India, they have been the harbingers of growth and instruments of financial inclusion, he said.
"Their reckless privatisation will have catastrophic consequences, and so will the diminishing independence of India's institutions," Gandhi said.
The Opposition party hit out at the BJP over the privatisation of public sector banks (PSBs), calling it "Beche Jao Party", and alleged that the central government had changed the Reserve Bank of India (RBI) to "Reverse Bank of India" by forcing it to make a "U-turn" over its own report.
The RBI on Friday said a research paper favouring gradual privatisation of public sector banks (PSBs) is not its view but that of the authors of the report.
Addressing reporters at the AICC headquarters here, Congress spokesperson Supriya Shrinate said the press conference was scheduled to discuss a very important study by the RBI research unit published in the August RBI Bulletin that raised concerns over the reckless privation of PSBs but instead the party has to first address how an institution like the RBI has been pressured by the government to issue a clarification.
The RBI has "disowned" the research paper, emphatically stating that it is not the central bank's view but that of the author, she said.
"Clearly, this isn't the first time the RBI has been forced to accept the government's will – remember the disastrous demonetisation," Shrinate said.
It's a pity that the same RBI which once hailed nationalisation of 14 banks as the single most important economic decision taken by any government since 1947, is today forced to disown its researchers' report praising PSBs and their efficiency, the Congress leader said.
The number of PSU banks in India has been reduced from 27 to merely 12 now, and the government plans to privatise more, Shrinate alleged.
The study by the RBI's research unit clearly red flags the consequences of bank privatisation as it highlights how the cornerstone of government policies has to be public good. So, the standard of efficiency for PSBs can't be profits alone, she said.
Shrinate pointed out that the report insists that large PSBs are better at priority sector lending including infra lending.
Also, it states that state-owned banks have played a vital role in counter cyclical measures that private banks do not implement, she said.
Shrinate said the RBI Bulletin clearly states that on measures of financial inclusion like total branches, agricultural advances and priority sector lending advances, public banks prove to be more efficient than private ones.
The bold decision taken by former prime minister Indira Gandhi to nationalise banks broke the monopoly of a few money lenders and ensured consumers, farmers, middle class and the poor had access to money instead of just a select few very rich industrial houses.
"I have said it before and I will say it again – public sector banks are not just financial institutions, they are actually agents of social empowerment," she said.
Underlining three demands of the Congress, Shrinate said the Modi government must lay out a full white paper on the privatisation of PSBs.
"The Modi government must also stop pressuring institutions like the RBI to tow the government line. One has to look no further than demonetisation to assess what forcing the RBI resulted in," she said.
The Modi government must pause, assess and make a public declaration on what it aims to achieve through "reckless privatisation", Shrinate said.
The research paper published in the August issue of RBI Bulletin said "the gradual approach to privatisation adopted by the government can ensure that a void is not created in fulfilling the social objective of financial inclusion".
"A big bang approach of privatisation of these banks may do more harm than good. The government has already announced its intention to privatise two banks. Such a gradual approach would ensure that large-scale privatisation does not create a void in fulfilling important social objectives of financial inclusion and monetary transmission," it said.