RBI’s autonomy under threat

With reference to the report ‘Govt panel recommends setting up an independent Payments Regulatory Board’ (September 19), the fact that an Inter-Ministerial Committee rejected the RBI’s view and suggested setting up of an independent Payments Regulatory Board (PRB) is not surprising given that the panel was headed by Economic Affairs Secretary Subhash Chandra Garg. Interestingly, the committee has also put forward a draft of the proposed Payment and Settlement System Bill 2018 for consideration by the Cabinet. Needless to say, the formal approval thereof by the Union Cabinet is already a foregone conclusion. Incidentally, it may be pertinent to recall that the govt had earlier ‘reconstituted’ the RBI based six-member Monetary Policy Committee too as per its own suitability. Could all this not tantamount to playing truant with the RBI’s constitution mandated ‘autonomy’ in one way or the other?

While this four-member committee is understood to have suggested the PRB to be an independent payments regulator, it has provided for the RBI to have significant representation on the board apart from suggesting a ‘formal’ mechanism for co-ordination between the RBI and the PRB. But it may be significant to observe that the Chairperson of the proposed PRB is going to be appointed by the government in consultation with the RBI but for sure not the RBI Governor, in his ex-officio capacity, as per the existing arrangements. So, the government may soon be ‘conveniently’ sidelining the RBI chief.

Mind you, the committee has also opined that ‘it is not necessary that in order to exercise its currency management function, the central bank must be the regulator of the payments sector’ while conceding that ‘there are many jurisdictions where the central bank is the regulator of the payment systems’. Thus, one fails to see any rationale behind ushering in the multiple regulators on this front too.

Panchkula (Haryana)

Despite the lessons of 2008, very large banks remain too big to manage and they engage in excessive risk-taking. Now we have the merger of three PSBs implemented without consulting even the top management of these banks. Not surprising given that their owner, the government, is also their largest borrower. Troubled financial institutions are a drain on the economy. The key issue is — are PSBs gearing up to meet the demands from expansion, optimise resources, increase their presence across the value chain, renew focus on R&D and innovation, create a better performance culture and service customer demands effectively? The babudom that conjures up such grand schemes may not even recognise the need for all this.

Navi Mumbai

With reference to the article ‘10 years after Lehman, it’s another mess’ (September 19), taxation is the main source of revenue for the government to meet its budgetary obligations — redistribution of income in the form of people welfare measures, infrastructure building and to reduce the dependency on external borrowings.

If the government is so convinced that the reduction in corporate tax would pave way for ease of doing business, expansion of industrial base and more employment opportunities, it (government) has to rejig the corporate tax in a way to boost the corporate social responsibility (CSR). For developing countries like India, the lowering of corporate tax has not helped in easing unemployment.

ICRICT’s proposal to tax multinationals seems to be right on paper but difficult to implement.

The attempt to take the corporate tax to the bottom is akin to throw away the wherewithal at hand and looking someone for bailout.

Cuddalore

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