Govt shouldn’t treat PSBs as its extended arm: RBI Governor

“By all means, the public sector banks are there to undertake social actions when necessary but those mandates should be backed by financial gains,” he said. The RBI is working with the government on issues regarding the governance at central banks. “We are in constant dialogue with the government, we are discussing these issues on governance and let us see how much progress the government and the RBI make,” he said.

The RBI has forwarded the Nayak Committee proposals on corporate governance — including splitting the CMD post, longer tenure for MDs and merit-based appointment in PSU banks — to the government for necessary action.

Regarding the Jan Dhan scheme, Rajan asked banks not to compromise on core objectives of the programme. “When we roll out the scheme, we have to make sure it does not go off the track. The target is universality, not just speed and numbers,” Rajan said. The scheme can be a “waste” if it leads to duplication of accounts, if no transaction happens on the new accounts and if the new users get bad experiences, he said.

On the economy, Rajan said India’s macro-economic indicators “are improving” and inflation is coming down but there’s “still some way to go”. “The recovery is still uneven,” Rajan said.