RBI needs more teeth to regulate effectively

Reserve Bank of India (RBI) has been in the news for wrong reasons in the recent past. There have been occasions when Doubting Thomases have raised fingers on the style of functioning of the 'bank of banks.' In another term, the RBI has been hogging the limelight for its 'actions' and 'non actions' both.

First, RBI shelved a very ambitious specialized supervisory and regulatory cadre (SSRC) scheme, merely one year after taking a poise to implement the same with full vigour. In fact, the regulator had geared up to kickstart the ambitious scheme a year ago. Shockingly, the scheme has been quietly shelved by RBI without any explanation. Not to mention, SSRC was supposed to act as an umbrella body for the newly carved out departments of regulation (DOR) and supervision (DOS) which have already been made operational. In fact, this kind of action by the financial regulator shows it in a dark shade.

This is not for the first time when the RBI has been hogging controversy. Earlier too the RBI had been pulled up by the finance ministry for the unnecessary delay on its part to bring IDBI Bank out of the PCA (prompt corrective action) regime, despite the bank's doing excellent on all the parameters set for the same. It was on the pressure put by the ministry that the central bank hurriedly did the job.

An article, published in the June bulletin of the apex bank, says that the apex bank can be characterised as a 'free-ranging' goose from the point of the surplus transfer alone. The article has a reference of the recent surplus transfer amounting to Rs 99,122 crore, which is almost double of the Budget estimate of Rs 55,000 crore, to the Centre for the nine months ending March 31. The narrative used in the article says it all.

In a recent development, the RBI has resolved the scam-hit Punjab and Maharashtra Co-operative Bank (PMC) crisis by allowing Centrum Financial Services and BharatPe to jointly set up a new small finance bank and given them six-year time for the approval. But it didn't do anything for the depositors of the bank who may have to sacrifice a significant part of their hard-earned money as the ownership changes the hands. The experts doubt if the remaining co-operative banks, which are currently under direct supervision of the RBI, will also meet the same fate, fleecing their depositors?

Again, RBI has asked the banks to preserve CCTV footages of the demonetisation period, from November 08 to December 30, 2016, preserved. It will prove to be a gigantic task for the banks as they normally overwrite such footages after every three years.

Last, but not the least, RBI is one of the very few public institutions in India, which does not have a whistle blower policy or effective grievance redressal system. It is not in line with the global best practices. RBI as a regulator, must display the highest standards of corporate governance for financial institutions to emulate.