Privatise state-run banks: RBI tells govt loud and clear in stormy meeting

Acharya put forth the proposal as govt nominees raised capital needs of PSBs

The Reserve Bank of India’s (RBI’s) central board saw a heated exchange between the representatives of the government and the central bank over the capital needs of public sector lenders in its last meeting, where Deputy Governor Viral Acharya suggested that privatisation of these banks be considered.   

The government nominees on the board told the RBI that it might not be able to give money to PSBs for capitalisation beyond a point as it would affect the fiscal deficit target. Acharya responded by saying that the government should consider privatising PSBs “if the fiscal deficit is a binding constraint”,