RBI’s frozen assets
RBI’s frozen assets: Provisions in excess of actual requirements should be written back and the excess given to the Government of India...
Review accounting practices of RBI and GOI
GOI as stakeholder and RBI as a responsible statutory body need to take cognizance of the issues raised by Sampathkumar in this article and weigh the possibility of a relook at the accounting practices followed by RBI, keeping the following factors in view:
(i) It has been the practice by banks including central banks to maintain reserves to meet unforeseen contingencies. While there has been some effort to introduce some uniform norms for capital adequacy for commercial banks across the world, it may be absurd to expect central banks to introduce uniform accounting practices as ownership pattern, mutual dependence on funding between governments and central banks and responsibility expectations vary widely from country to country.
(ii) In the present Indian context, going by past experiences, GOI’s financial management including market borrowing also need central bank’s backing and if the central bank’s balance sheet is made weak, falling back on RBI in times of need will become difficult.
(iii) GOI’s own management of finances needs much improvement. To give some examples, (a) GOI is deferring setting up a pension fund to meet pension liabilities which run into lakhs of crores and are being met on a ‘Pay As You Go’ basis which is the safer language for not making provisions for liabilities which have fallen due and (b) Funds with statutory bodies like EPFO and PSUs, PSBs and organisations like LIC are not allowed to be professionally managed and are used as ‘captive’ resources for funding GOI expenditure.
M G Warrier
Comments