Who should own Reserve Bank of India?: When owners disown RBI

Economic & Political Weekly, December 29, 2018

Letters

Privatising the RBI

In the article “Paranoia or Prudence?

How Much Capital Is Enough for the

RBI?” by Abhishek Anand, Josh Felman,

Navneeraj Sharma, and Arvind Subramanian,

published in EPW (8 December

2018), the authors have refrained from

commenting on the adequacy of the

Reserve Bank of India’s share capital,

which has remained static at `50 million

since the inception of the bank. I am not

commenting on the content of this article,

which I perceive as a pro-government

note to take forward the idea that was

mooted in the Economic Survey 2015–16,

but withheld on being proved unwise by

RBI’s erstwhile governor Rag huram Rajan.

On this issue, no elucidation is needed

beyond reading Rajan’s speech on “The

Independence of the Central Bank,” delivered

at St Stephen’s College in Delhi.

In a recent article, “Why Should the

Government Own the RBI?,” in the Business

Standard, dated 22 December 2018,

T C A Srinivasa Raghavan opened a

debate on the privatisation of the RBI

which had fascinated me, especially his

recommendation that the government

should “in the interest of academic enquiry,

commission a three-year project

to exa mine the implications of re-privatising

the RBI, to be led by Mr Rajan and

Urjit Patel.” Raghavan’s apprehensions are

lar gely due to past experiences of typical

governmental lethargy for quick actions.

However, some recent incidents have revealed

that where there is a will, there is

a way. One such, in the context of transforming

the RBI to a “board-driven” professional

entity, is the appointment of the new

governor, Shaktikanta Das, in record time.

In tandem with such proactivity, the

central government will need to issue an

ordinance if it wants to privatise the RBI

“in principle.” Some of the issues under

this ordinance could be the reconstitution

of the RBI’s central and local boards,

determining the limit for the bank’s share

capital—which could be between $500

billion and $1,000 billion—based on its

shareholding pattern; determining the

central and state banks and other

non-banking fi nancial entities share—

which should be about 60% to 70%—in

the reconstituted RBI; and redrafting the

RBI Act in conformity with the existing

Preamble of the RBI Act and role expectations

from the central bank. The job of

drafting such an ordinance should then

be entrusted to an expert committee of the

RBI’s past—Bimal Jalan, Rakesh Mohan,

Raghuram Rajan and Urjit Patel—and

present governors, without much delay.

M G Warrier

Thiruvananthapuram