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The Centre’s move to ‘manipulate’ the Finance Bill 2015 to flag off major amendments to the RBI Act 1934 and related laws has invited sharp rebuke from within the central bank.
Motives are being attributed to its failure to move a separate Bill, which would have brought the amendments to detailed Parliament scrutiny and deliberations.
In their current form, the proposals will affect the operation and effectiveness of RBI, sources say.
The apex bank’s central board should take a call and place its considered opinion before the government at the earliest, according to their view. RBI officers and employees have voiced its concern over the manner in which far-reaching changes are sought to be effected in its powers and privileges.
The United Forum of Reserve Bank Officers and Employees has sent a note in this regard to all MPs, members of the central board, and Chief Ministers; chiefs of political parties; and trade unions.
Debt management Signatories include Samir Ghosh, Convenor of the forum and General Secretary of the All-India Reserve Bank Employees Association; SV Mahadik, General Secretary of the All-India Reserve Bank Workers Federation; CM Paulsil, General Secretary of the All-India Reserve Bank Officers’ Association; and RN Vatsa, General Secretary of the Reserve Bank Officers’ Association.
An autonomous Public Debt Management Agency is being proposed to take away the debt management function from RBI. Regulatory and depository functions may also be shifted out.
The note observed that while Government borrowing may have gone up substantially over time, the RBI has managed to conduct it in an efficient manner at low cost and without risk.
Euro Zone example An autonomous debt management agency in its place would mostly be concerned about its own functions and not able to manage the complex function of debt management.
This has been proved in the Euro Zone where independent agencies issued short term/foreign debt in a disproportionate manner and exposed the governments to great risks.
The RBI system of trading, payment and settlement is world class and has become benchmark for several emerging market economies.
A well-coordinated effort in terms of monetary policy, public debt and regulation of G-secs market is sine qua non for securing financial stability, the note recalled.
Also, the centre could incur huge costs if such enormous amounts of securities are transferred to agencies such as the NSDL.
“We wonder if the ministry had done any cost-benefit analysis before proposing this,” the note said.
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