In the Indian context where regulators are appointed by the government, it is not often that regulators speak their mind. Especially if it is to tell their political bosses off ! The Reserve Bank of India (RBI) Governor's show of spunk in telling the finance ministry not to micromanage banks must, therefore, be applauded. The RBI, unlike many other central banks, is not autonomous in law. Over a period of time, thanks to a succession of competent governors, it has won a certain degree of de-facto independence for itself. Nonetheless, governors, with some exceptions, have been wary of calling a spade a spade........
2 comments:
It is indeed commendable that the Governor has publicly asked the Finance Ministry not to micromanage banks. In fact, if a PSB were to ask for clarification from RBI about the Government directive to limit Bulk deposits to 10% of the total deposits, RBI should promptly advise the bank that it is not part of its Directive and hence would have no objection if it were to decide otherwise on the basis of its judgement. This would send a signal to the Finance Ministry not to issue such directives to PSBs in future. I would even go to the extent of suggesting that no directive should be issued by the Finance Ministry directly to banks and if the Ministry feels that directives on some matters are required to be issued it has to write to the RBI and directives would have to go to the PSBs from RBI only. Otherwise, it would not be fair to RBI which has been given the responsibility for performing the regulatory and supervisory role over banks under the Banking Regulation Act.
As an officer in charge of Rural Planning & Credit Department in the Bangalore regional office of RBI in 1986/87, I had told in categorical terms the bank chairmen in an SLBC meeting that the RBI's directive to banks is to achieve only upto 40% of credit to Priority Sector and would have nothing to do with the interpretation of the State Development Commissioner in the meeting that the limit of 40% is only the minimum and banks should achieve more.This was appreciated and received a loud applause from the audience.
A. Chandramouliswaran.
It is disturbing to find that RBI Governor is made to voice his concern in the open about the basic niceties in the dealings of Finance Ministry with institutions in the financial sector. As has been pointed out in the report this is not the first time a regulator finds himself helpless and comes to the public expressing his concerns. Unfortunately, the tendency on the part of GOI to use its ‘power’ and fast-track implementation of its programmes, rather than going through established procedures, which involve consultations, legislative procedures and taking stakeholders into confidence, is on the increase.
This trend has been seen in UID project (first going ahead with the project and then tracking the purposes and trapping other organisations even before ensuring that the project has the resources and manpower to cover the target group within a reasonable time), in the introduction of New Pension Scheme through the backdoor for Govt employees and gasping for breath finding that there are no takers for the scheme when it is thrown open to workers outside the government and public sector (Finance Ministry has set annual targets for Public Sector bank field staff for canvassing NPS accounts!) and in several other initiatives of GOI.
To ensure that boards and CEOs of public sector organisations and statutory bodies ‘behave’ GOI has gradually made several slots on the boards and at the top post-retirement resting places for IAS retirees.
As regards nominations on board certain self-regulatory norms like the following could be considered:
• Prescribe an average age-band for boards. This will reduce the number of over-ripe retirees automatically.
• Avoid nominating retirees from departments/organisations which have a direct policy relationship with the organisation to which nomination is made.
• Make retirement benefits of posts of Joint Secretary onwards more attractive, so that they will not be financially dependent on the new job for their ‘lifestyle’.
These are illustrative. Basically, our approach to service has to improve.
M G Warrier, Mumbai
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