Why blame RBI?

The editorial attempts to find fault with the RBI for its regulatory and supervisory lapses and has come out with some suggestions to regain the loss of trust in Private Sector Banks among the public. Being a bankers bank and a regulator and supervisor, no doubt RBI has the moral and physical responsibility to ensure that the banks do not err and indulge in transactions which are against prescribed rules, norms and guidelines, but one has to appreciate that RBI with its limited resources of man power about 17000 staff cannot be expected to scrutinize millions of transactions involving exotic products carried out by the banks and its associate business concerns having thousands of branches and whose only philosophy is to make money at any cost. All said, RBI cannot escape from its responsibility of keeping the banking system sound and viable but aberrations do take place in the context of ever increasing expansion of business having inter linkages with various markets, institutions and economies under a severe competitive and liberalized environment. The individual banks’ greed and over confidence that they can get away with any violations if detected and questioned because of the generally deteriorating conditions in the economy in the area of adherence to Corporate Governance, accounting and auditing principles, uncalled for and unhealthy interference from various quarters in banks functioning in general and appointment of Directors without complying strictly with the fit and Proper criteria, is the key issue for the banks indulgence in such undesirable activities where RBI can have a say only after the event has occurred and that too when banks are taken up for annual inspection.Time to have a comprehensive review of everything for regaining the losing confidence of the public in the banking system.

Dr.T.V.Gopalakrishnan
(This is in response to the editorial on Sting in the tale Lessons for RBI and banks from Cobrapost investigation appeared in Business standard dated 16/5/13).