Apropos the article, "Decoding the Indian financial code 2.0" (August 18), it appears the Reserve Bank of India (RBI) is set to lose its autonomy. A monetary policy committee with government-nominated members outnumbering those appointed by the RBI and no veto power for the RBI governor are acts of encroachment and interference by the government. How accountability would be fixed in such a situation is not clear.
Till now, maintaining financial stability was the RBI's responsibility and this went hand in hand with its other functions such as coordination, promotion and development of the financial sector. What is the need to disturb this all-inclusive system?
This apart, creating one more vertical for government debt management seems unnecessary. An earlier attempt to get it managed by the Securities and Exchange Board of India was abandoned. Instead, the flaws in the existing system need to be found and fixed. Besides, it would be risky to have outside professionals manage such an agency.
The new financial authority will regulate non-banking credit institutions while financial products will remain with the RBI. This will lead to two points of control. With two regulators, accountability will likely be called into question and have the same impact as multi-controlled cooperative banks.
The RBI should be the supervising authority of the financial grievance redressal system. Without enough powers, a financial regulatory authority may not be able to regulate new products or players seeking licence to operate in the market.
Regulating money and regulating the market are different, but both have one common factor - liquidity - which is under the RBI. This function of the RBI need not be disturbed.
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Till now, maintaining financial stability was the RBI's responsibility and this went hand in hand with its other functions such as coordination, promotion and development of the financial sector. What is the need to disturb this all-inclusive system?
This apart, creating one more vertical for government debt management seems unnecessary. An earlier attempt to get it managed by the Securities and Exchange Board of India was abandoned. Instead, the flaws in the existing system need to be found and fixed. Besides, it would be risky to have outside professionals manage such an agency.
The new financial authority will regulate non-banking credit institutions while financial products will remain with the RBI. This will lead to two points of control. With two regulators, accountability will likely be called into question and have the same impact as multi-controlled cooperative banks.
The RBI should be the supervising authority of the financial grievance redressal system. Without enough powers, a financial regulatory authority may not be able to regulate new products or players seeking licence to operate in the market.
Regulating money and regulating the market are different, but both have one common factor - liquidity - which is under the RBI. This function of the RBI need not be disturbed.
Avinash Thite Pune
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number