....The Commission envisages a 12-member RBI Board with not more than one half being executive members; this by itself is reasonable but one has to dwell a little further into the Commission's proposal. There is an insidious proposal, in that the post of 'Governor' should be abolished and the head of RBI should be named as 'Chairperson'. The Commission's ready defence would be that, after all, the head of the US Fed is called 'Chairman'; the Commission would conveniently forget that members of the 'US Fed are called Governors and the head is known as Chairman of the Board of Governors. Furthermore, the Deputy Governors are to be brought down a peg and called members and one of the members would be called an 'administrative law member'. The whole ploy seems to be to downgrade the RBI to the level of any other financial regulators. The Commission needs to appreciate that central banks are unique. .............
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1 comment:
Not much research is needed to conclude that finance ministry and FSLRC, in a hurry to resolve certain minor issues, ignored the evolution of the role of RBI and the care with which RBI has nurtured the financial sector. Fed Reserve and RBI function in two different worlds. To say that time is not right for dismantling or truncating the RBI which is doing creditably well as is being admitted in several international forums, would be telling the obvious.
The dissenting notes recorded by 4 out of 7 members who signed the final report are well-argued documents, which inter alia plead the case for maintaining the basic features of RBI and assert the need for allowing the central bank to carry on with its present mandates. One wonders what motivated the FSLRC Chairman to finalize the report ignoring the difference of views expressed especially by K J Udeshi, P J Nayak and Y H Malegam.
It would appear that the Commission did not get opportunity to understand the present relationship between the RBI and GOI. The regulatory apparatus plus legislations in financial sector in India are in working condition. The FSLRC’s effort to re-invent them has pushed the present regulators and supervisors to a confused state, making the possibility of an intelligent debate on the issue remote.
The idea of creating a Unified Financial Agency for all financial regulators except RBI, truncating RBI by separating Public debt Management and keeping the agency doing that work (presumably with the same work force) in RBI premises, later UFA subsuming even RBI, all give a feeling that the FSLRC was not allowed to ‘apply its intelligent mind’ and in the eagerness to satisfy all, and so fast, it has forgotten its own brief. Perhaps, the purpose would be served better, if RBI is allowed to function with its present mandate, a coordination committee sorts out issues among the remaining regulators. If GOI aim is to reduce the number of regulators, after necessary groundwork, merger of the regulatory agencies outside RBI one by one, as work stabilizes could be thought of. The twin goals of one Unified Financial Agency and managing the man-power-related issues that may arise with merger here could be better handled this way.
M G Warrier, Thiruvananthapuram
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