Two-third of my tenure as RBI Governor was under BJP

New Delhi: Former RBI Governor Raghuram Rajan, who faced a stinging attack from Finance Minister Nirmala Sitharaman for presiding over the "worst phase" of the Indian banking sector, on Thursday reminded her that two-third of his tenure as the head of the central bank was under the BJP government.

Rajan, who was Governor of the Reserve Bank of India (RBI) from September 5, 2013 to September 2016, said during his term a clean-up of the banking sector that was "clogging" with bad loans had begun and the job remains unfinished.

He said the country needs a new generation of reforms to accelerate economic growth. At 5 per cent GDP growth rate, India was witnessing substantial economic slowdown.

"I had just over eight months in the previous (Congress) government and I had 26 months under this BJP Government. So much of my term as RBI Governor was under this government," he told CNBC in an interview.

He was asked about Sitharaman's comments in New York earlier this month where she said that the Indian public sector banks had the "worst phase" under the combination of former Prime Minister Manmohan Singh and Rajan.

Rajan, however, hasten to add that he doesn't want to get into a political debate on the issue. "Let me not get into a political back and forth.

The reality is, there is a clean-up which we started, which is underway, which needs to be completed fast. The recapitalisation has been done, but it also has to be done in the non-bank financial sector, which is ceasing up and you need to clean-up, get the financial system going again if you want stronger growth," he added.

Sitharaman's comments at the Columbia University were in response to a question on Rajan in his previous statements apparently mentioning that in its first term, the Narendra Modi government had not done better on the economy because the government was extremely centralised and the leadership does not appear to have a consistent articulated vision on how to achieve economic growth.

She had retorted back saying instead there were major issues with bank loans during Rajan's tenure as the central bank head. "I'm taking a minute to respond.

I do respect Raghuram Rajan as a great scholar who chose to be in the central bank in India at a time when the Indian economy was all buoyant," Sitharaman had said.

"It was in Rajan's time as Governor of the Reserve Bank that loans were given just based on phone calls from crony leaders and public sector banks in India till today are depending on the government's equity infusion to get out of that mire."

In the interview with CNBC, Rajan, however, said the seeds of problems were sown in "euphoria" in the pre-2008 global financial crisis.