The banks may be owned by the central government, but the money they lend belongs to the public. Governor Rajan has done well to stick to his guns, and finance minister Jaitley in not pressuring him to do otherwise
.............Given that the state will now contest RBI’s claims with its own set of data, it is obvious the chapter is far from closed, and a lot will depend on whether or not the central government weighs in favour of the state or remains a neutral observer. But what is important is RBI has not just learnt the lessons of the last Rs 60,000 crore loan waiver just ahead of the 2009 general elections—farm repayments slowed the next year also as farmers realised banks could be arm-twisted—it is willing to do something about it as well. It is not as if, in the past, RBI has not tried to block the political class from taking matters in its own hand; it is just that it has been quite unsuccessful. In Andhra Pradesh, RBI was helpless when the government said that loans to MFIs need not be repaid as they were at usurious rates, though RBI tried to fix things later through a committee tasked with regulating MFIs. .........
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