Needed, more deliberation - The Hindu

Needed, more deliberation - The Hindu

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 has been 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. It has to
be admitted that till Dr Rajan’s emergence as an acceptable leader of the
Indian financial sector, the FSLRC’s effort to re-invent the institutional
structure of regulatory bodies had pushed the regulators and supervisors with
the exception of RBI 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 had forgotten its own original 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


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