..................."We can look at the RBI's wish-list and help in capacity augmentation. But that does not mean that allocation of the function of regulation should be conditional on that wish-list. MFIs are the smallest and weakest link in the chain of financial services and it is not fair to ignore the weakest link by saying one does not have the capacity or reach," a finance ministry official said. He said the RBI already has a pan-India presence, around 18,000 employees and the requisite expertise to effectively regulate the sector. The official added that the plan was to eliminate the multiplicity of regulators and have a uniform law..........
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3 comments:
I would add one more to the list that it has passed on to NABARD a part. Even for the Cooperative sector, it should resume the supervisory and regulatory responsibility because of the proven failure of NABARD to handle it. Secondly, at the time when such function was entrusted RBI was owned partly by RBI whereas now it is fully owned by the State Government. Both structurally and functionally, the regulatory function of financial entities should rest with the RBI.
It is not RBI was owned partly by RBI but NABARD was owned partly by RBI. This correction may please be noted.
It is a matter of comfort that when briefed properly Finance Ministry views issues with an open mind and shows signs of a pragmatic approach in solving problems. Certain ‘subjects’ in the concurrent list, at least to the extent they relate to financial sector and economic development need a review. MFIs and cooperative banks and several other players in the financial sector try to get the best of both the worlds and get out of standard regulatory norms applicable to the business they do. The present thinking that Reserve Bank should have regulatory responsibility on all financial institutions augurs well for better management of the financial institutions. At a time when we are talking about BCs reaching out to villages not covered by banks, RBI’s outreach cannot be flagges as an issue for moving away from regulatory responsibility. Though protected with the bureaucratic insulation that it ‘cannot be a pre-condition’, Finance Ministry has offered to strengthen RBI for improving its capacity.
M G Warrier, Mumbai
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