Monumental failures of RBI

Monumental failures of RBI: India's central bank has failed in regulating the banking system...

RBI, a peg to hang?

This refers to the interesting indictment “Monumental failures of RBI” (Business Standard, August 23) by Gajendra Haldea who says, ‘India’s central bank has failed in regulating the banking system’. Having spent 10 years in the Finance Ministry and almost equal period with the Planning Commission (which had to be dismantled recently at Modi’s hands!), Haldea must have done his homework well before making this sweeping statement. I trust him, because Kanika Datta had found out long back that
Gajendra Haldea is an ‘Inconvenient truth-teller’.
The author has got his statement that ‘RBI has done a commendable job in managing the monetary policy, but as a regulator of the banking system, it has failed the Indian economy.’ acknowledged by the then RBI governor Raghuram Rajan in May 2016. This introductory assertion is not substantiated much in the article, as perhaps, because the divisions in finance ministry with which the author was associated didn’t expose him much to the role of RBI in Banking Regulation and Supervision or the relationship issues between GOI and RBI. The concluding observation that RBI is trying to catch fish without wetting its hands is a merciless one attributable to ignorance of RBI’s history.
Having said that, the issues raised by the ‘Inconvenient truth-teller’ need to be addressed. There is always ‘scope for improvement’. RBI’s institutional structure need to be strengthened, expertise and professionalism have to be infused, legal constraints, if any, in performing the central bank’s mandated
role need to be removed fast and last but not the least, the pre FSLRC(Financial Sector Legislative Reforms Commission) prestige of Reserve Bank of India need to be restored. FSLRC which was to work on ‘financial sector legislative reforms’, wasted all its energy on weakening RBI with a vengeance and is responsible for the present chaotic situation of Indian Financial System.

M G Warrier, Mumbai


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