Rajan, Manmohan left stink of corruption: FM

Finance Minister Nirmala Sitharaman has accused former Prime Minister Manmohan Singh of leaving behind "a nasty stink of corruption" in the public banking sector, which suffered its "worst phase" under him and former Reserve Bank Governor Raghuram Rajan.

During Rajan's tenure "loans were given just on the basis of phone calls from crony leaders and public sector banks in India till today are depending on government equity infusion to get out of that mire," she said on Tuesday during a lecture at Columbia University.

Sitharaman further said: "Indian public sector banks did not have a worst phase than when (there was) this combination of Dr Manmohan Singh and Dr Raghuram Rajan, as Prime Minister and Governor of the Reserve Bank."

She was responding to an audience member’s question about Rajan's reported criticism that PM Modi's government is "extremely centralised" and does not have a "consistent and articulated vision" for economic growth.

Lashing out at Rajan, Sitharaman said, "Rather too democratic a leadership, which probably will have the approval of quite a lot of liberals, I am afraid he left behind such a nasty stink of corruption which we are cleaning up even today."

"So, if there is a feeling that there is a centralised leadership now, I like to say that a very democratised leadership led to a whole lot of corruption," she said.She added, "You need to have a country as diverse as India with an effective leadership".

With eminent Columbia University economists, Jagdish Bhagwati and former NITI Aayog Vice Chairman Aravind Panagaria, in the audience, Sitharaman asked, "Can all of us put together also think of asking what ails our banks today? Where has it been inherited from?"

She said she wanted "answers for the time when Dr Raghuram Rajan was here in the Governor's post". She said, "The Indian banks, for which today to give a lifeline is the primary duty of the finance minister of India. And a lifeline kind of an emergency does not come overnight."

Sitharaman also dismissed criticism by Economics Nobel Laureate Abhijit Banerjee on Monday that the government should be focused on boosting demand rather than on monetary stability. She said that this was precisely what the government was doing by making credit available through the banks and other institutions and through a massive investment in government infrastructure projects.