The Hindu Business Line : Concern over RBI's move to de-link public debt management

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Concern over RBI's move to de-link public debt management

Our Bureau

`States in the North East will be hit hard'

Kolkata , Nov. 16

Mr Manik Sarkar, Chief Minister of Tripura, has expressed serious concern over Reserve Bank of India's reported move to de-link public debt management from its normal operations, pointing out that such a step will hit the weaker States, particularly in the North-East.

"RBI manages the public debt on behalf of the Central Government as well as State Governments and, if the country's central bank chooses to run away from this role, the financially weak North-Eastern States will face serious economic crisis as they will find it difficult to raise resources, particularly from the market in the face of stiff competition from stronger States," Mr Sarkar observed, while addressing a seminar on `Role and responsibilities of RBI in the changing economic scenario', organised by All India Reserve Bank Employees Association, here recently.

If the weaker States, already afflicted with a host of problems, were pushed further into crisis, their development activities would suffer and the gap between them and the stronger States would widen, aggravating regional imbalance.

Low credit-deposit ratio

In the entire North-Eastern region, there are about 2,000 bank branches and yet the credit-deposit ratio was very low. In Tripura, as he pointed out, the ratio was as low as 30 per cent. "Couldn't RBI, as a monetary authority, do anything in this regard by prevailing upon the banks to step up their advances?" he asked.

The Tripura Chief Minister also expressed concern over the circulation of fake notes, particularly in the North-East, and urged RBI to take necessary steps in this regard. He also appealed for opening more offices in the region. "Right now there is only one RBI office in Guwahati for the entire region and this is not warranted," he said regretting that the Tripura Government's appeal to RBI for opening an office in the State had gone unheeded.

Reforms

Mr Nirupam Sen, West Bengal Minister for Commerce & Industry, was worried over the way RBI was going ahead with the reforms in the financial sector. "RBI's present approach is unlikely to benefit the larger section of the community," he observed.

Dilution of role

Mr Rupchand Pal, Member of the Parliamentary Standing Committee, expressed concern over the steady dilution of RBI's role as a regulator. He wondered if the same was the fate of the central bank in any other country. RBI's abdication of role from the cheque clearing system might spell disaster for the economy, he added.

Prof. Kamal N. Kabra, noted economist, emphasised the need for more democratisation of the decision-making process in the bank, which must be made more accountable.

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