CEA Arvind Subramanian bats for more private banks, fewer PSBs; says historians will assess demonetisation

Chief Economic Advisor (CEA) Arvind Subramanian on Friday said that India should have fewer banks and that the number of private sector lenders should be higher than the number of public sector banks, according to a media report. “A healthy system is where we have three to five public sector, three to four private sector banks and one or two foreign banks,” the CEA, who will be quitting his post on 26 July to return to the United States, told  The Times of India in an interview. Speaking about the Narendra Modi government’s decision to demonetise Rs 500 and Rs 1,000 notes in November 2016, Subramanian told the newspaper that “the fact that money came back is not an argument for saying those with black money were not punished.” [caption id=“attachment_2644726” align=“alignleft” width=“380”] A file photo of Arvind Subramanian. PIB[/caption] “Was it right or wrong? Was it helpful or not? You may have to leave it to the historians, three, four, five years from now, to do a proper assessment,” the CEA was quoted as saying by the newspaper. He also spoke about his relationship with Raghuram Rajan, saying he shared a good rapport with the former Reserve Bank of India (RBI) governor. On Wednesday, the outgoing CEA expressed skepticism  over the handling of the mounting non-performing assets (NPAs) crisis as he praised Rajan for identifying the lacuna and trying to resolve it. He also appreciated Rajan for his efforts in tackling the crisis. Furthermore, Subramanian said that there was an environment of fear among bankers and they were reluctant to lend besides retail lending. Subramanian’s departure as the CEA comes at a time when the government is grappling with economic woes stemming from a soaring oil import bill, state banks saddled with a mountain of debt and sluggish private investment. With inputs from agencies