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  • Category: Miscellaneous

    Is it good for the Center to dictate terms in functioning of an independent organization like RBI?

    RBI and CBI are independent autonomous organizations which have a vital role to play in the development of the country. But at present they got into headlines as Central government is involving much in the functioning of these autonomous institutions. The RBI governor Mr.Urjit Patel who is nominated by Mr.Modi government itself threaten to resign from the post as Center is trying to dictate the functioning of RBI. Center threatening RBI to bring Section 7 of RBI ACT to dictate the policies of RBI. Due to this a rift is developed between RBI and the Center. The Ex-Chairman of RBI explained that RBI is like a Seat Belt for the Center and if the government ceases RBI's autonomy fatal accidents bound to occur. Like that Center is also involved in peaceful functioning of CBI. Do you support such involvement of Center in the functioning of autonomous organizations?
  • #652529
    Yes, it is right. Dr. Manmohan Singh, the former Finance Minister and Prime Minister, has said this. He has clearly stated that the RBI Governor must listen to the Finance Minister.

    Let us not mix up and RBI and CBI to confuse others. The mandates of these two organizations are different in nature and are not comparable.

    Beware! I question everything and everybody.

  • #652531
    It is the norm established. Nothing new.
    Our country is independent. But as far as I know, no institution is 100% independent. They can't act as per their whims and fancies. The sovereign power lies in the citizens of this country. The elected government acts on behalf of that. Other institutions have to act as per the constitution or as per the act passed by the parliament. The parliament is having ultimate powers. It can even change the constitution, except basic principles and remove constitutional authorities from their posts after following the procedures prescribed. Only parliament and government is directly responsible to the citizens. The others like RBI, HC/SC, Election Commission or CBI, are not elected by the citizens'. The government should act as per the needs and these actions should be approved by the Parliament.
    This is a general understanding. The complete matter is not known to anyone. The matters are being changed as per the convenience of the individuals.

    drrao
    always confident

  • #652535
    Every organization will have their norms and a set of rules and regulation to follow for its efficient functioning. If the government intrudes in its activities quite often its efficiency get crippled. Previously BJP as an opposition party used to attack Congress that all the autonomous independent organizations of the country were weakened and destroyed by its involvement in their functioning. But really what BJP is doing now?

  • #652539
    The Government of India invoked Section 7 of the RBI Act according to the reports in news channels. This section is to be invoked under extraordinary circumstances only. The Government has to explain what are those extraordinary circumstances. The Government, according to reports, wants the Reserve Bank of India to transfer the surplus amount available with it. Why the Government is demanding money from RBI? Is anything wrong with the economy?
    The Government also wants the RBI to permit 11 public sector banks which were restricted by the RBI from giving any loans. Why so much of interest in the banks that have large Non Performing Assets? What are the vested interests of the Government in interfering with the functioning of the RBI?

    " Be Good and Do Good "

  • #652543
    We need to wait for the answers. In India, every independent organization is dictated by the government in power. The internal matters of these organizations remain between themselves and very little come out in public. We talk about press freedom but we see the voices have been throttled, the CBI was termed as 'Caged Parrot' by the apex court during the regime of UPA, now we have seen the feud between two top officials of CBI.

    There is a tussle between the government and RBI, few days earlier a show-cause notice has been issued to the RBI Governor by the CIC for failing to keep up with the Supreme Court judgement regarding publication of the defaulters' list that has the name of the persons taken loan to the tunes of Rs. 50 Crore and above. Well, it has to be investigated under whose instructions the defaulters' list is not disclosed. Every government meddles with the affairs of the 'independent organizations' to suit themselves. If it's meddling with their affairs then it's not justified, but we need to know if there is any other issues related to this development.

    Sankalan

    "Life is easier when you enjoy what you do"

  • #652565
    Our Government want to give loan to every person without understanding whether he/she will be able to repay them or not. Many peoples in banking are saying that the pressure is on bank to give loan as elections are coming.
    Also, because of Demonetization Banks NPA has increased multifolds. This is due to many quarters banks was not able collect NPA loans and they were busy in Demonatisation, Jandhan and GST type works. If bank don't do banking and do useless government work, obviously NPA will increase.
    Now Government is seeking large sum of money from RBI. Why our government which is running our country from Oil taxes needed this massive amount of money?
    Only work this government did was Toilets and that too made cheap type structure without water.

  • #652569
    Section 7 of the RBI Act clearly says that the Center may issue directions to the RBI 'in consultation with the Governor' and it also says that a Central Board of Directors may also be constituted but that is again 'subject to such directions that are passed in consultation with RBI Governor'. Keeping the present developments in mind, it can be safely concluded that the Governor was not consulted by the Center and their interference under Section 7 was, therefore, uncalled for. The idea behind the interference may become more clear if we consider the present financial condition of the nation and the high pitched demonetization taking a different turn.
    'It is the mark of an educated mind to be able to entertain a thought without accepting it'. - Aristotle.

  • #652572
    # 652543: The CIC has given notice to PMO and the Office of the Finance Minister also. The notice is as follows.

    "The commission directs the CPIOs of the RBI, the PMO and office of the Finance Minister to explain the action taken on the alerting letter written by Former Governor of RBI Raghuram Rajan on February 5, 2015, before November 16, 2018," the order notes.

    In a few days time, we will know what action the RBI, PMO and the O/o Finance Minister have taken on the Mr. Raghuram Rajan's letter. They may even try to excuse themselves citing in the interest of the public or national security to give the answer sought.

    " Be Good and Do Good "

  • #652587
    One Member has stated "Our Government want to give loan to every person without understanding whether he/she will be able to repay them or not. ". I have not understood the relevance of this statement in this thread. The Government formulates various schemes under which PSU banks provide loans to those persons who are eligible for the loan under a particular scheme.

    The RBI and the Government's difference in policy matters is not directly related to this.

    The same Member has also said: "Also, because of Demonetization Banks NPA has increased multifolds". Is this statement true?

    Beware! I question everything and everybody.

  • #652603
    The financial health of the Banks has suffered badly due to escalation of NPA and strangely in most of the cases, the recovery of bad debts seems to be impossible since the some defaulters have absconded after the withdrawal of the massive amount and the Bank - authorities have raised their hands in getting back the whopping amount of money released by the Bank. The Banks have different set of rules . Ordinary defaulters having taken a loan as low as one lakh are harassed by the touts of private banks to the point the defaulters suffer bout of depression. How to contain NPA should be the prime objective of both the Government and the Banks so that the financial - health is not crippled to a dangerous level.

  • #652620
    Partha at #652587, loans, demonetization, the present economic condition of the nation, the center asking RBI to release funds from the reserve etc are all related to the present issue between the center and the RBI. The RBI would not have reacted in this manner had the center followed the laid down procedures instead of exhibiting their usual big brother attitude.
    'It is the mark of an educated mind to be able to entertain a thought without accepting it'. - Aristotle.

  • #652626
    Is RBI an independent organization? Central Government has two directors in RBIs board. These directors can very well influence RBI approach towards Government policies. It is an arm of Finance Ministry.
    It is not correct to view everything on political angle. There is no rift between RBI and GOI. There may be differences of opinions. That may not be construed as rift. What GOI is telling that RBI's capital and reserves are a serious concern. The percentage of reserves to total assets has come down from a set target of 12% of balance sheet total to mere 7.5% in 2016-2017.That was 12% in 2009.This may be the reason of today's media hyped controversy.GOI has not demanded money from RBI!
    RBI was in full association with GOI for demonetization programme. Now RBI observed that short term cost outweigh long term economic gain

    I love chocolates and ice creams!

  • #652645

    For the stability and smooth functioning of the country and its essential areas of governance we need and have certain constitutional bodies (bodies which get their authority and sanctity straight from constitution). They are and should be insulated from the political changes happening in the government. If they get influenced or get affected and changed by the political changes,then the country's stability will collapse and there will not be any continuity.

    The administrative bureaucratic set up was thus called earlier as the 'steel frame'. The constitutional bodies in general need not be affected by the policy changes of the incumbent governments. These bodies should owe their first and prior allegiance to the Constitution and the provisions implicit and explicit there of.

    Election commission, RBI, Judiciary, Comptroller and Auditor general etc. are certain examples. Even though these posts are appointed by political government system, these officials do not resign like other high officials when a government is changed.

    RBI is the central bank of our country. It is the centre point of the banking and currency system of this country. It cannot function as per wishes of the political parties at the head of government. They may generally follow the broad vision framed by the Parliament as subjected to the Constitution. If the RBI officials are not allowed to function independently, then there is no need for a central bank. It can be just a department of the finance ministry headed by some political bosses.
    The independence of the central bank is necessary as it is to deal with the central banks of other country in matters of currency exchange and banking matters.

    In the present context,the government appears to have some hidden agenda or aims. Not just in this case, but for a series of events happening inour country for past few years,the government(the ministers and PM) do not have any clear justification to offer. They rather keep dubious silence or just deflect the questions alleging oppposition's lies. This is wrong. The people are watching, and they have their own doubts to be cleared. If the government is not coming with clear and transparent answers,then rumours will get the upper hand.Lies will become truths. That is not good for the nation.
    The ruling party at centre is either adamant or making itself blind by closing eyes .

  • #652660
    Here, the thread author is asking whether is it good for the Centre to dictate terms in functioning of an independent organization like RBI.
    My point here is how best the system can take the advantage of the change of Guard at New Delhi to harmonize the handling of inflation and growth by RBI and GOI.Reserve Bank of India has very limited instruments to tame inflation. The political decisions such as administered prices,subsidy,waiver of taxes, loans ,dues to Government etc are having tremendous influence on inflation.RBI alone may not be able to contain this issue. People opted for a change in the year 2014.The interpretation of the changes based on politics and religion/majority and minority/left and right etc have turned to hard figures in financial planning. This is happening whichever political parties coming at the centre.RBI alone can't tame those hard figures. Government of India should keep all these in view and extend fiscal policy support to RBI initiatives.
    Another alarming question is how RBI is managing the exorbitant NPAs.

    I love chocolates and ice creams!

  • #652669
    The Reserve Bank of India (RBI) is fully owned by the Government of India(GOI). The GOI appoints the Governor and Directors to look after the functioning of the RBI. It is an autonomous body. It is not an arm of the Finance Ministry. They work in coordination.
    Recently, the Deputy Governor of RBI talked about the interference of GOI in the functioning of the RBI. He said that the RBI Governor also endorsed his view. The Staff Association of RBI also supported the views expressed by the Deputy Governor of RBI. It is clear that a rift exists between RBI and GOI.
    The main problems are the transfer of surplus funds with RBI to GOI and removal of restrictions on 11 banks from lending money. The RBI is opposed to these two.
    Inflation control is one of the duties of the RBI. The increase or decrease of repo rates is also a contention between the RBI and GOI.
    In view of the ensuing elections and with a view to gain political advantage the GOI is interfering with RBI. This is obvious from the recent developments. The GOI might have said that it did not ask RBI to transfer the surplus to it but it is trying to circumvent and have its own way with RBI. What the GOI is trying to do is felt as bad by economists. The World Bank also expressed its displeasure with the GOI interfering with the RBI.
    The people opted for a change and brought in a new Government. It is for governance to improve the country but not the political party in power. A win in the election is not a blanket approval of whatever the party in power wants to do.

    " Be Good and Do Good "

  • #652672
    Autonomous organisations work under their own framework and within the limits of the freedom they are given under the rules and regulations. RBI is working as per that mandate.

    Now if Govt wants to bring some fundamental changes in its perception then it can bring those changes with proper amendments in the overall guidelines meant for functioning of RBI. Further, if Govt interest is in broader interest of the country, RBI must cooperate rather then opposing it. The duty of the RBI head is only limited to the Govt about bringing out the dire consequences, if any, of such measures proposed by the Govt.

    In democratic working there is no point in making a issue just for ego or self prestige. We must consider the things from financial and economic angles and if it is conformed by the experts on the subject, there is no point in not agreeing with that.

    Knowledge is power.

  • #652689
    I am asking a general question? If every institution should be given freedom and independent identity, then what for Central Government should be? I am not contesting the arguments that certain agencies are working under the influence of Central Government. But is it new today? When did these agencies function independently in the last 70 years?
    Regards,
    Jagdish

  • #652691

    Jagdish, institutions like the Judiciary, Election Commission, CAG, RBI etc have been given autonomous status and they have been placed directly under the Constitution with some purpose. Governments have no authority to interfere in their functioning and have no role to play. The very structure of our democracy will be at stake once the political influence is allowed to creep into their independent status and none of these agencies have allowed it to happen to date. Even when the legislative or executive machinery failed, it is the firm belief of the people in such institutions that have kept our democratic set-up safe and moving. Therefore it is in the interests of the nation that the independence of these bodies are maintained at any cost and are not allowed to be used to further the political interests of any party.


    'It is the mark of an educated mind to be able to entertain a thought without accepting it'. - Aristotle.

  • #652733
    "The people opted for a change and brought in a new Government. It is for governance to improve the country but not the political party in power. A win in the election is not a blanket approval of whatever the party in power wants to do."
    Political parties have election promises. There are manifestos. These promises set off whatever little done by RBI to manage the economy. In 2017,UP Govt has announced a farm loan waiver to the tune of Rs 36300 Crores. This announcement is really an additional burden on already stressed economic environment. The fear is that the UP waiver will be followed with similar announcement by other states. During the period 2008 – 2013,UPA Government's promises were the waiving of farm loans to the tune of Rs 52000 Crores. These schemes were meant to help indebted farmers in districts where suicides occur, was so haphazard and faulty in implementation that no records were maintained of farmers applications accepted or rejected by lending institutions or how many farmers were given fresh loan as a result of debt waiver/relief.
    Whatever the policy decisions of the ruling political parties, Central Bank has to follow.Mr Urjit R Patel can't advice political parties to not to make any pre/post poll announcement of freebies.

    I love chocolates and ice creams!

  • #652734
    "......institutions like the Judiciary, Election Commission, CAG, RBI etc have been given autonomous status and they have been placed directly under the Constitution with some purpose. Governments have no authority to interfere in their functioning and have no role to play."--------------Let me give a hypothetical example. Let us suppose that the Election Commission, an autonomous body, declares that Lok Sabha election won't be held in 2019. Will we accept this decision? Will the Government, Supreme Court, media, etc. accept the decision? I think no.

    So, we must understand that autonomy is not absolute. There are various checks and balances. Let the hatred to a particular person or party not make us so illogical that we lose every bit of common sense.

    Beware! I question everything and everybody.

  • #652752
    Let us not perceive it as a tussle between the Govt and RBI because that is the last thing required in this matter. Based on certain factors If Govt wants RBI to formulate a new policy or stricture then RBI has to consider it seriously and present to the Govt all the pros and cons of these measures. RBI may be autonomous but they are not supposed to give judgemental statements in the media. They have to answer back for everything to the Govt under which they are working.

    There are many organisations which are autonomous to some or more extent but they are all bound by the Govt directives within the framework of our constitution and directive principals.

    Knowledge is power.

  • #652753
    #652734, Mrs. Indira Gandhi imposed Emergency from 1975-'77 constitutionally only. But the people, media and political leaders opposed it strongly as their democratic freedom was curtailed. Do you think if the government has the powers to cut off the wings of RBI by any illogical means and even people have to close their mouths and watch the bad affect of mjority given to BJp?

  • #652755
    I fail to understand how the declaration of internal emergency by Mrs. Indira Gandhi is relevant in the debate of autonomy and power of RBI. Mrs. Gandhi was heading a Union Government and RBI is an institution.
    Beware! I question everything and everybody.

  • #652757
    The RBI has specific functions to perform. The manifesto of the political parties is not the concern of the RBI. The Government generates revenue through various types of taxes. RBI is not a revenue earning source for the Government. The RBI act itself says that the Government can initiate dialogue with RBI and issue directions accordingly. The very fact that the RBI Governor who is supposed to be a puppet of the present Government is now objecting its interference clearly indicates a serious problem. For whatever reasons, the Government wants the RBI surplus to be transferred to it. When the RBI objected and when there is a lot of dissents, the Government changed its route and is trying to circumvent the RBI. The term of this Government comes to an end in less than five months. What is the urgency for the Government to try to fix the surplus to be held by RBI? It looks all is not well with the economic front. The people who are supporting the interference of the Government in RBI have to keep the public interest in mind.
    The board meeting of the RBI is scheduled for the Nineteenth of this month. Let wait and see what drama this Government is going to play.

    " Be Good and Do Good "

  • #652766
    #652734, the example quoted is astonishingly amusing, to say the least. It is a clear indication of to what level people can go to support an idea they follow. I am not at all clear as to how Partha concluded that being autonomous means that they can do anything at their whims and fancies. Are they not guided by the Constitution and the relevant laws of the Country? What I said was that political parties or governments cannot interfere. Any doubts?
    'It is the mark of an educated mind to be able to entertain a thought without accepting it'. - Aristotle.

  • #652767
    Deleted being copied content- Editor.
    Beware! I question everything and everybody.

  • #652769
    It has to be noted and acknowledged that the Modi Government has increasingly tried to centralize powers. The Government has gone too far in trying to beat down RBI 's autonomy. How can it demand that the RBI 's reserves should be given to solve the problems created by them?
    We need solid answers for the mess in Non Performing Assets. The Finance Minister ought to answer us.

  • #652797
    It is true that there are some relationships issues between RBI and GOI. Discussions are free and frank.RBI's capital and reserves are under pressure. It is a very serious concern and eroded to all time low. Views expressed by RBI regarding debt management, fiscal deficit, measurement to be initiated by center and state governments to improve the environment to support economic development are varying with GOI. Who has to control the foreign currency and Gold Revaluation account and Contingency fund? There are differences of opinions. "Rift" is the word not to be used in this case. That word is the political one used by the people to malign the reputation of the RBI/GOI. Finance Minister Arun Jaitely already clarified that there has always been and will continue to be a regular interaction between RBI and GOI. Let us wait till the Board meeting then there will be more clarity.
    I love chocolates and ice creams!

  • #652804
    The Indian Rupee weakened very much against the dollar recently due to various global factors. At one time the rupee touched a low of Rs 74.4825 against one dollar. The RBI sold dollars to stabilize the rupee. This is the reason why the forex reserves of the RBI dropped but not to an alarming level. The RBI depending upon the necessity may resort to issue of NRI Bonds and other measures to attract dollars and improve forex reserves as it has done previously. The RBI is governed by financial experts for its smooth running. These experts are chosen by the Government only. The main problem with the RBI and GOI is about the transfer of surplus reserves and allowing the 11 public sector banks to lend money. The restriction by RBI on these banks is not indefinite.
    The word rift is being freely used as the RBI Deputy Governor went public with the support of the RBI Governor to highlight the interference of the GOI in RBI functioning. The Staff Association of RBI also supported their contention.
    Hope the RBI Board Meeting will help both the parties to come to an understanding which will enhance the RBI's autonomous status in the public.

    " Be Good and Do Good "

  • #652811
    @ Partha for statement #652587
    Intelligent person will understand what is relevant or not. I have many relatives in banks on various positions and we know what kind of pressure is on person who distribute loans. Because the person who distribute loans to public will responsible for future NPA etc and he / she may get bad record in employment etc.
    Now If any person use common sense will understand that If Mr Modi one great scheme which is Jan Dahn has 32.5 crore accounts in total and most of these accounts don't have proper, records details and money. Now who is responsible for the COST of keeping these accounts which cost bank certain amount of cost per month and per year. Suppose every account cost 25 rs per month and then multiple these 32.5 crore account with 300 and you will cost for maintaining these accounts is 9600 crore per year. Who is responsible for this Obviously mr Modi.
    Yes what i told is true and Ex Chief of RBI Mr Raghuram Rajan also told day before yesterday that Due to Demonetization and GST there is slowdown in economy and 7% growth rate is not enough for country like India and Government is excessively centralized. This is i used to say many times in forum. Now come to Current India gdp it is 2.8 trillion. So, Let suppose if Due gst and demonetization India's economy is surgical strike by Mr Modi by 2% that means we lost approx $400 billion gdp loss. So, India lost $400 billion+ GDP size due inexperience activity by our PM Modi.
    Mr Modi's most policy are fail and useless. He and his team is more busy in advertising all sort of scheme on tv and internet/social media.

    @ neeraj for #652626
    for statement "The percentage of reserves to total assets has come down from a set target of 12% of balance sheet total to mere 7.5% in 2016-2017.That was 12% in 2009."
    You can't compare 2016-17 with 2009 reserve ratio because in 2009 India's banking NPA was not in that bad shape as now. This is the probable reason Reserve ratio may be down and RBI has not allowing some banks to distribute more loans.

    From 1947, Only this government is getting problem in all places which is RBI, Supreme Court, CBI, Election commission etc.


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