The Congress on Friday accused the Narendra Modi government of ignoring the “warning” of the Reserve Bank of India (RBI) on privatisation of public sector banks, recalling how the Centre didn’t pay any heed to the Opposition party’s observations on demonetisation as well.

Congress communications chief Jairam Ramesh tweeted: “The RBI issues warning! The number of public sector banks has already been reduced to 12 from 27. The government is planning to reduce it further, perhaps bringing it down to only one public sector bank. The RBI says this may be an invitation to disaster. But the Modi government always does what it wants. Even on note-bandi, they didn’t listen to the RBI.”

Ramesh was referring to news reports suggesting the RBI has warned against the privatisation of public sector banks.

The leader of the Opposition in the Rajya Sabha, Mallikarjun Kharge, tweeted: “After exposing the Modi Government’s denial on inflation, RBI has yet again warned this autocratic regime against privatisation of banks, a concern consistently raised by the Opposition. Modi ji, why is every move and policy of your government obsessively bent on destroying Indian economy?”

As the Congress picked up the issue, the RBI promptly came up with a clarification, saying: “This is regarding reports in certain sections of the media stating that the RBI is against privatisation of Public Sector Banks (PSBs). These media reports have cited an article titled ‘Privatisation of Public Sector Banks: An Alternate Perspective’ published in the August 2022 issue of RBI Bulletin. The article is authored by researchers of RBI. In this regard, it is clarified that, as clearly stated in the article itself, the views expressed in the article are those of the authors and do not represent the views of the RBI.”

The central bank added: “The press release relating to the August 2022 Bulletin highlights that ‘the gradual approach to privatisation adopted by the Government can ensure that a void is not created in fulfilling the social objective of financial inclusion’. The concluding paragraph of the article mentions that: ‘From the conventional perspective that privatisation is a panacea for all ills, the economic thinking has come a long way to acknowledge that a more nuanced approach is required while pursuing it.”

The RBI pointed out that the article mentioned that “recent mega merger of PSBs has resulted in consolidation of the sector, creating stronger and more robust and competitive banks”.

The apex bank also pointed out that the article had argued that “a big bang approach of privatisation of these banks may do more harm than good. The government has already announced its intention to privatise two banks. Such a gradual approach would ensure that large-scale privatisation does not create a void in fulfilling important social objectives of financial inclusion and monetary transmission.”

The RBI clarification said: “Thus, the researchers are of the view that instead of a big bang approach, a gradual approach as announced by the Government would result in better outcomes.”