Reserve Bank of India: Ownership issues
December 22, 2018
This refers to TCA Srinivasa-Raghavan’s article “Why should the government own the RBI?” (Business Standard, Line and length, December 22). I am impressed by the suggestion in the concluding paragraph. I quote: “…in the interest of academic enquiry, commission a three-year project to examine the implications of re-privatizing the RBI, to be led by Mr Rajan and Urjit Patel.”
The writer’s suggestion is influenced by the burden of knowledge of history and the awareness of the GOI's usual tendency to dodge quick solutions. But, recent experiences in India have shown that, where there is a will, there is a way. I would refer to only two of them relevant in the context of transforming RBI into a non-GOI owned, ‘Board-driven’ (I have been hearing this in the media on and off nowadays) and professional entity performing all of the central bank’s present roles and functions. They are, nationalization of banks in India and appointment of Shaktikanta Das after complying with all procedural formalities in record time (let us not publicize the time taken for that). Next paragraph is based on the assumption that ‘in principle’ GOI has decided to privatize RBI. The process will involve the issue of an ordinance by Centre to provide for:
1. Return of the present share capital of RBI at book value to GOI by RBI.
2. Reconstitution of RBI’s Central Board and Local Boards.
3. Arriving at the amount of share capital RBI should have. This could be between $500 billion to $1000 billion depending on the shareholding pattern.
4. Taking into account the special Indian conditions, Centre, states, and banks should hold 60 to 70 percent of the reconstituted RBI. Rest could be held by institutions like LIC.
5. Redrafting RBI Act to ensure that the basic features of the legislation remain in conformity with the existing Preamble of the RBI Act and role expectations from the central bank.
Perhaps, a Committee comprising Dr Bimal Jalan, Dr Rakesh Mohan, Dr Rajan, Dr Urjit Patel, and the present RBI Governor may be entrusted with the job of drafting the Ordinance in a month’s time.
M G Warrier, Thiruvananthapuram