India needs more private banks and only 3-5 PSU banks: Arvind Subramanian

Outgoing Chief Economic Adviser (CEA) Arvind Subramanian feels that Indian banking sector should have only a dozon of banks with private banks more in number than public sector banks. "India should have just three to five public sector banks and as many private sector banks," Chief Economic Adviser Arvind Subramanian said in an interview to ToI.

Speaking about the health of Indian banking sector, Subramanian said the country needs more reforms. "We need to do more. We need to think about how to improve governance, more private sector participation."

"I think there should be more private sector banks and probably fewer banks. A healthy system is where we have three to five public sector banks, three to four private sector banks and one or two foreign banks,"Subramanian told ToI.


On the relationship between RBI and government, he said " by definition, there will be friction because objectives are different, mandates are different, sometimes the personalities are different. If there isn’t some amount of tension then things are not right. The only thing is how it’s resolved. It should never be unseemly."

Also talking about his relation with former RBI governor Raghuram Rajan, Subramanian said he has a very freindly relation with the Rajan. "I tell Raghu this, the only person who knows someone better than his wife, is a co-author. So, I know Raghu better than his wife and Raghu knows me better than my wife. We know each other very well."

On demonistisation he said: "The fact that money came back is not an argument for saying those with black money were not punished. Was it right or wrong? Was it helpful or not? You may have to leave it to historians, three, four five years from now, to do a proper assessment."

Arvind Subramanian had last month announced that is quitting his post on July 26 to return to academic research in the US, becoming the third high-profile economist after Raghuram Rajan and Arvind Panagariya to depart during the Prime Minister Narendra Modi’s regime.