Be it the Reserve Bank of India or the Central Bureau of Investigation or for that matter any other regulatory or investigating authority, when they clash with the government in public, the ripple effect is bound to be felt down the ladder. Uncertainty can play havoc with employee morale within an organisation.
The RBI versus Finance Ministry clash hit a new low when Deputy Governor Viral Acharya gave an explosive speech, followed by rumours about RBI governor Urjit Patel’s possible resignation. Though Patel has maintained a stoic silence, a debate has yet again started on autonomy and accountability, and how far is too far for the government to intervene. Especially as the consultation process around the dreaded Section 7 of the RBI Act, which gives the government the power to give directions to the central bank, was invoked. Lost in all these are the employee issues.
“Though we are not directly impacted it does have its implications — like, recruitments may not happen, pension and other employee benefits may take a side step,” says a member of the All India Reserve Bank Employees Association (AIRBEA).
So why are we suddenly seeing so many clashes at the top? Especially when the powers that be have had a say in the filling of these top posts? Is it personality or turf war?
“I think it is mostly a case of trust deficit or confidence crisis. At times, individuals occupying the position also matter. There could be personality conflict that can lead to such circumstances. Whatever be the cause, there is always a way to resolve the differences, most of the time built into the system,” says RV Verma, former whole-time member (Finance) of the Pension Fund Regulatory and Development Authority (PFRDA) and former Chairman and Managing Director of National Housing Bank, the regulator for housing finance companies. However, Aashish Chandorkar, a public policy commentator, feels that it is not always personality-driven. “This is an election year. The government has its own asks. The reticence of Urjit Patel clashes with the demands of Finance Ministry and perhaps creates a personal effect.”
Former RBI governor Bimal Jalan says, “Each one (regulator and the government) has a well-defined role to play.” He adds that difference in views, if any, should not be debated in public but sorted out across the table.
D Swarup, former pension fund regulator, the man responsible for ushering in Indian pension reforms, and setting up the system when PFRDA was still awaiting its statutory powers, also says “the sovereign and regulator have a distinct role to play. Checks and balances should be there without the operational functions of the regulator being compromised.”
As an official with capital market regulator SEBI points out, each of these regulators has come through Acts of Parliament that clearly spell out the objectives. But problems happen when the government thinks these regulators are attached offices or subsidiary departments.
Big Brother attitude?
Former Chairman of IRDA, Hari Narayan, no stranger to controversies — his clash with SEBI was famous — believes that if the government desires a certain course of action, it should issue a direction on the matter, and not expect an independent authority to implement oral instructions which the authority holds undesirable.“Further, an authority's freedom to hold a contrary view ought not to be undermined,” he says.
“Accountability and independence have to go hand in hand,” reasons Chandorkar. Referring to the RBI imbroglio, he says, “Ultimately, sovereign structure is non-negotiable, at the same time, the government has to let RBI be. This is achieved only via coordination and both sides acting in the spirit of the structure, not just the word.” He suggests a formal codification of issues.
“RBI Act has only a general guideline on separation of power. But there are no specific numbers. For example, what is the right level of RBI reserves and how should it be split between revaluation and contingency funds? This is only a matter of perception, there is no codification. In such a case, any differences of opinion between government and the central bank can be construed as attack on bank independence. A formal definition and codification can be very helpful,” he says. “Dialogue is the only way out — the RBI should ease on areas like liquidity, NBFC funding, and payment regulations…If RBI concedes on some of the procedural aspects, there will be more trust between the two sides. Government, on the other hand, should ensure that there are no resignations from the RBI,” says Chandorkar.
This is echoed by the central bank’s employee association. In fact, no sooner had RBI Deputy Governor spoken his mind on October 26 than AIRBEA was quick with its statement.
Defending Acharya’s outburst, AIRBEA said that it was waiting to happen due to long simmering discontent. “…there is an intrinsic schism and this is not regime specific. One remembers the well-known duel between the then Finance Minister P Chidambaram and former RBI Governor D Subba Rao, when the latter commented in his parting speech that Chidambaram had been so angry with RBI that he preferred to ‘walk alone without RBI’, but he (Chidambaram) would definitely think, ‘Thank God the Reserve Bank Exists,” AIRBEA had stated. “..Let the two talk and sort out the issues instead of government trying to ride roughshod over the RBI…”the association had said.
No comparisons
What about the CBI or Comptroller & Auditor General? These are agencies often said to be under government control. A former CBI Director says it is not correct to draw a parallel between CBI and RBI. “In the case of CBI, the rules are laid out very clearly, the organisation has to perform its duty of doing investigation, not necessarily take policy decisions. If the officer follows the rule book, then there is no issue. But again, it varies from person to person,” he says. For example, if it wants to, the CAG, without influencing the audit process, can delay the tabling of the report. Similarly the CBI can delay the investigation.
Clashes between agencies or discord within are all inevitable and have happened in the past. But these should be sorted internally and not aired in public.