Do RBI governors know so little?

"I am being lectured on the Reserve Bank of India's (RBI's) balance sheet by this eminent group of current and former RBI officials, and the hordes -- especially the fawning elites in journalism, TV, financial community, etc -- are cheering them on," wrote Arvind Subramanian, previous Chief Economic Adviser to the Government of India. "I respond with my arguments. The eminences are dismissive. Suddenly Ben Bernanke and Mario Draghi appear. They had been bold in deploying their balance sheets during their respective financial crises. taking risks that eventually paid off." "'This is such a no-brainer," they say. "Obviously, you should do whatever it takes." A DPhil from Oxford, a former economist at the IMF and fellow of two institutes in Washington DC, Subramanian ticks all the boxes of a super elite. What does he know that all the present and former governors of the RBI don't? He thinks that the RBI should transfer Rs 4.5-7 trillion to the government which would use the money to recapitalize public sector banks which are sitting on bad loans in excess of Rs 10 trillion. The RBI has accumulated Rs 9.6 trillion over a period of decades, to be used in an emergency. It was because of a vigilant RBI that India could avoid the financial crisis in 2008, which nearly brought down the banking systems in the US and Europe, wrote J Nocera. "India had a bank regulator who was anti-Greenspan. His name was Dr YV Reddy, and he was the governor of the Reserve Bank of India." "Did India's bankers stand up to applaud Mr Reddy as he was making these moves? They were naturally furious, just as American bankers would have been if Mr Greenspan had been more active." Public sector banks were used by the Congress to finance pet projects, labeled "telephone banking" by Prime Minister Modi. It will cost an estimated Rs 2.7 trillion to finance Modi's loan waiver for farmers, to win elections. Perhaps, we can call it 'megaphone banking' because it was announced openly and not over a phone. Another Rs 6.37 trillion have been dished out to young people as loans to start new businesses. This government earned Rs 11 trillion in windfall gains by taxing oil products as prices fell from over $100 a barrel to around $30. If Modi has wasted this humongous amount on handouts, can Subramanian guarantee that he will not waste the bonus from RBI to win the forthcoming general elections? Bankers have been known to dispense loans in return for bribes, so bailing them out so easily may encourage them to indulge themselves. Finally, the Eurozone has a GDP of $18.8 trillion and the US dollar is the official currency of 7 countries in addition to the US. It is because of the Federal Reserve and the European Central Bank that global debt has risen to $182 trillion, 225% of global GDP. Perhaps. RBI governors know more than Subramanian. Possible.