Reserve Bank of India: Ownership issues
December 22, 2018
Ownership issues
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
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