Is the Reserve Bank of India toothless?

Abstract

The framework for the exercise of powers in private sector banks is different from the one for public sector banks. It is good that Reserve Bank of India (RBI) governor Urjit Patel has finally broken his long silence. Unlike his predecessors, Patel has been reticent in indicating the thinking of the central bank. While the interviews and speeches of governors and deputy governors work as powerful signalling and reassuring measures—both to the markets and to the general citizenry—the silence has also been an eerie signalling mechanism that was shaking our confidence. It is good now that there is some scope for debate and dialogue.

The governor’s speech on 14 March at the Gujarat National Law University, Gandhinagar, highlights significant issues about the difference in regulation of public and private sector banks. The governor raised the issue of dual control over banks based on ownership issues. The problem is deeper than this. But while recognizing this, one is not sure that the current crisis could have been addressed in the framework suggested by Patel. He talked about powers to make board-level changes and forced mergers. Those powers are in the nature of deterrence and are too drastic to be curative in the current instance. Read more at: https://www.livemint.com/Opinion/cMlSsSTlNuo9MsiygoqPEO/Is-the-Reserve-Bank-of-India-toothless.html