Letters: Audit of regulators

With reference to "CAG seeks auditing of regulators like RBI" (July 2), the Reserve Bank of India (RBI) has proved to be capable of regulating the banking sector in India over a period of time. However, the current turmoil raises questions about its leveraging capacity, if not its credibility and competency. Moreover, as a regulator RBI does face conflict of interest that prevents it from giving an unbiased answer to the sudden rise in bed debts of public sector banks (PSBs).

Banking in India is marred by growing non-performing assets (NPA) and disclosures made by various PSBs under the RBI's asset quality review (AQR) reflects that the problem couldn't have been a sudden outcome but developed over a period of time. A big question is - why the RBI was not watchful enough in detecting the menace of NPA rather than coming out with AQR only when it became too apparent? Were there any compulsions or external pressure on the regulator? Was it a result of its limited leveraging capacity with banks? Should there be an autopsy, by an independent institution like the Comptroller and Auditor General (pictured), of the legal framework that renders banks toothless when dealing with delinquent borrowers? Audit of regulators like the RBI, Securities and Exchange Board of India and Insurance Regulatory and Development Authority by the CAG shouldn't be made routine practice. But, a mechanism should be in place for independent and unbiased investigation by the CAG.

Sagar Soni, Gandhinagar

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