Indian Finance Minister Arun Jaitley. Photo: AFP
Indian Finance Minister Arun Jaitley. Photo: AFP

Finance Minister Arun Jaitley criticized the Reserve Bank of India (RBI) on Tuesday for failing to prevent excess lending, as the war of words between the government and the central bank worsened over various regulatory issues.

The minister, speaking at an event in New Delhi, said the central bank “looked the other way” when banks gave loans indiscriminately between 2008 and 2014, Livemint reported.

Tensions between the ministry and the RBI have risen since the bank’s deputy governor Viral Acharya warned last Friday that undermining the central bank’s independence could be “potentially catastrophic”.

Over the past year there have been a number of flashpoints between the national government and the Reserve Bank. The issues include stressed assets totaling 10 trillion rupees on the banks’ books, the Financial Resolution and Deposit Insurance Bill, the Punjab National Bank scam, the liquidity crisis in non-banking financial companies, differences over a prompt corrective action framework, the crisis in shadow lender IL&FS and regulation of state-owned banks.

FSDC meeting

The Finance Minister is also expected to chair the 20th meeting of the Financial Stability and Development Council (FSDC) in New Delhi on Tuesday, which Reserve Bank Governor Urjit Patel is also expected to attend, the Business Standard reported.

The FSDC brings all financial regulators to one table to handle matters related to financial sector stability, inter-regulatory coordination, and financial sector development.

Apart from Patel, the other officials expected to attend the meeting include stock market regulator SEBI’s chairman Ajay Tyagi and insurance watchdog IRDAI’s chairman Subhash Khuntia.

The latest meeting is being held in the backdrop of IL&FS and its subsidiaries defaulting on debt payments, which has cast a long shadow over Indian stock markets and the economy.