Reserve Bank likely to lose financial independence

The Reserve Bank of India (RBI) may be brought under the category of other regulators, who might have to park their funds with the government. Banking sources said the move would deal a final blow to the financial autonomy of regulatory bodies.

The finance ministry is understood to have sounded out to the central bank over a proposal, according to which RBI will have to maintain its accounts and finances with the Consolidated Fund of India (CFI), according to official sources.

It could be mentioned that the process of maintaining the entire accounts of regulators like the Insurance Regulatory and Development Authority (Irda) , the Telecom Regulatory Authority of India (Trai) and the Securities and Exchange Board of India (Sebi) with CFI is already under way.

Currently, RBI’s funds are managed by its own central board. According to the proposal, RBI will come under the Subordination Act of the central government and it will have to seek the government’s permission whenever it needs funds.

If the decision goes through, it will also be a blow for RBI employees, who are already fighting tooth and nail against the government’s decision to withdraw the pension scheme. While over 2,500 RBI employees had gone on mass casual leave on October 21, the employees may once again proceed on leave for two consecutive days — December 1 and 2 — to protest the government’s move.

Employees are of the view that the pension scheme could have been resolved amicably since its update only requires Rs 10 crore, while the corpus of RBI employees’ contribution fund is Rs 4,500-5,000 crore, said banking sources close to the development.

RBI updated the pension scheme in 2003 for pre-November 1997 retirees, aligning their basic pension with the basic pay prevalent at that time . The decision was taken by RBI’s central board in the presence of nominees of the Central government.

Incidentally, the RBI pension fund is self-sustaining without any contribution from the exchequer and the fifth Pay Commission for Central government employees has stipulated that autonomous institution like the RBI may have their own pension scheme, subject to their fund position.