RBI and autonomy disharmony

The RBI has always been looked upon as an autonomous body which has under its umbrella all commercial banks, be in PSU or private banks or foreign banks. It is not only vested with the powers to formulate the monetary policy but also to monitor the functioning of all banks.

However, for the present government to attack RBI and blame it for the NPA mess does not augur well. The RBI should never be used as a ‘pawn’ in the chessboard of politics and never permit any authority to use them as ‘puppets’. The government, however, has every right to ask for an answer to the mounting NPAs and steps taken by the RBI to curb or reduce them.

Bengaluru

The spat and rift between the government and RBI is not a good sign for our nation, which surfaced after the central bank’s Deputy Governor Viral Acharya’s candid speech warning against diluting the RBI’s autonomy. On the other hand Finance Minister Arun Jaitley is criticising the RBI of failing to prevent bad loans. But it’s obvious that both are equally responsible. So they should both work with cooperation otherwise, it may tarnish the country’s image among investors.

Kannur

With reference to ‘FinMin looks to bury the hatchet with RBI’ (October 31), events in the last four years have been historic in India in every sector and the financial sector is no exception. The open dissent by judges of Supreme Court with the CJI last year and the recent ‘washing the dirt in public’ by the top brass of CBI are examples of the struggle between the central government and public institutions for establishment of supremacy.

It started with non-extension of term to Raghuram Rajan, whose innings was marked by the focus of monetary policy shifting towards inflation target, and the clean up of banking system with the Asset Quality Review.

The present Governor started with a reduction of 50 bps in Repo, signalling that he is more inclined to toe the government’s line. Then came demonetisation with debates still going on whether RBI was consulted at all. But even if there were differences they were not made public.

But after that both have been at loggerheads, starting with RBI circular in February 18 to refer loans for resolution even if there is one day of default. Move to create an ARC for power sector NPAs or creation of ARC to take over the entire corporate stressed assets are again exercises to keep the balance sheets of PSBs healthier not by recovery but by removing the bad portion to another entity.

Now the pressure is once again on RBI to ease on the restrictions on banks under PCA, to enable them to finance the liquidity stricken NBFCs.

The present government had not invested adequately in the PSBs nor permitted them to approach the market, so as to nurse them back to health.

The PSBs including those under PCA are pressurised to achieve targets under MUDRA and other government schemes.

Instead of trying piece meal solutions, it will be prudent on the part of Centre to sit with the regulator and address the real issues affecting the financial sector.

Coimbatore

The turf war between the RBI and government comes close on the heels of the CBI muddle.

The institutional erosions appear to have become a generic problem. A clear tendency to pack institutions with people with ideological affinity as against professional competence is visible.

The fight between North block and Mint street is nothing new. YV Reddy in his book has given a vivid account of his fights as RBI governor with then Finance Minister Chidambaram on policy issues and how they were handled diplomatically.

Maybe the present actors have a lesson or two to learn from him.

Kannur

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