The state-owned banking sector shouldn't be bailed out using RBI funds, of course -- but not by using tax money either. The government appeared to be uncomfortable with its inability, under Rajan, to direct the central bank's actions. Modi himself doesn't seem too sympathetic to privatization.India's Prime Minister came into office promising "maximum governance, minimum government." )An attempt to use the RBI's rainy-day cash pile would not just dent the central bank's independence, but also the credibility of India's already shaky fiscal arithmetic. It's obviously tempting to use the RBI's funds instead of finding money from the general budget.Such a move would reverse years of institutional evolution at the central bank.

Source: Economic Times July 04, 2016 04:15 UTC