Professional Not Personal

I read S S Tarapores entertaining, eponymous column (BS June 6) where he takes umbrage at my some of my statements. I have been a persistent critic of the RBIs policy of including net IBLs in the denominator of cash ratio and I, both qua economist and a friend, discussed this issue with him on numerous occasions during the last two years. I tried to convince him that in almost all the countries in the world net LBLs are excluded from the reserve ratio and for good economic reasons. Despite all my persuasive skills he remained stubborn as his is wont. The inclusion of IBLs was a religious faith with him not subject to reason. This policy was consigned to the dump at the first opportunity after his departure. Why should he then feel offended by my statement that he was piqued by the demolition of his credit policy architecture? By his own admission, he has been a cog in the RBI wheel but he should know that a misshapen cog can bring the wheel to a grinding halt.

 

Tarapore accepts my contention that there can not be a quirk, if the entire banking system including RRBs and the cooperatives is considered. However, I have a problem with these revealed facts. If the RRBs and cooperatives are excluded from the definition of the inter-bank market, how will he define the deposits held by RRBs and the cooperatives with commercial banks? Are they classified as IBLs or outside deposits? If it is the former, my criticism still remains valid; if not, the whole rigmarole on net IBLs is meaningless. Obviously, his successor at the RBI unravelled the intricacies of the LBLs by simply reducing the cash ratio on them to the minimum of 3 per cent !

Tarapore is also worried about me being obsessively critical of the RBI. What I wrote on this is in the public domain and it will stand or fall on its own merit. But I have to make one point clear: he or, for that matter, any other functionary of the RBI should not be presumptuous enough to equate himself or herself with that institution, like the king of France. As it is the RBI is effete, senescent and intellectually impoverished body which is incapable of being an independent central bank in an emerging monetary environment. I criticised it not because of personal gripe it has treated me most generously and I reached my intellectual maturity in its halcyon days. Tarapore should be a little humble, forgetting for a while that he was once its deputy governor and look around the world. Most of the central banks both in the developed and developing countries are redefining their roles, downsising them, inducting outside staff with knowledge and skills and projecting a new vision.

Finally, let me disappoint Tarapore that the criticism such as mine will not make him a martyr, however he may desire to be one. He has to work harder for it. For all his emotional outburst, Tarapore will continue to be my friend as he has been during many years past. For the life of me I will never say that with Tarapore as my friend, I do not need an enemy.