Public sector banks: Buck passing between RBI and Ministry of Finance

The main beneficiary of the RBI's contempt of the court's decision on RTI is PSBs, over which the RBI claims to have no control!

Debashis Basu

Last week, Urjit Patel, among the most reticent and shy governors of the Reserve Bank of India (RBI) in recent memory, broke his habitual silence when, at long last, the finger of blame for frauds in public sector banks (PSBs) pointed towards the RBI. He declared that the central bank’s regulatory authority over PSBs was weaker than that over private sector banks. Mr Patel’s speech made other important and valid points, but his argument that the RBI did not have enough powers over banks was so surprising that it dominated the headlines. Those who know the formal structure of reporting by banks to the RBI and the enormous informal power that it exercises over them were left flabbergasted.   Governor Patel had three main arguments. One, PSBs are regulated by the Government of India (GoI) under three Acts. Two, there has been a “complete removal or emaciation of RBI powers on corporate governance at PSBs”. Three, the RBI cannot remove directors or change the
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: Mar 19 2018 | 5:56 AM IST

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