The Government is understood to have
appointed recently two auditors to examine the accounts of the Reserve
Bank of India. Rather than give the central bank more autonomy, as is
the case in most countries, the approach, of late, has been to take away
even the limited functional/operational autonomy the RBI enjoys.
The
setting up of the FSDC (Financial Stability and Development Council),
nomination of two government officials to the RBI Central Board, the
recommendations of the FSLRC (Financial Sector Legislative Reforms
Commission) to have a super-regulator, and the way Government interferes
in the Bank’s functioning directly/ indirectly only point towards
making the RBI merely a government department with an independent
office.
Although the RBI Act 1934 has an enabling
provision (Section 51) to have the accounts audited by special auditors
of the Government, this has never been done as the RBI, since its
inception, has been conducting its business meticulously and never given
room for any sort of allegations to be levelled against it.
This is where the institution stands apart from the others, be they in government or the private sector.
Appreciated abroad
The
RBI has earned the appreciation of developed nations for its
professionalism and efficient way of discharging its duties without fear
or favour.
The RBI’s capital is fully owned by the
Government and it does not raise any funds from any other source to
carry out its functions.
Being a banker both to the
Government and banks, it has access to their deposits and these funds
are used only to assist them with some central banking functions that
are closely linked to bettering the overall interests of the economy.
It
does not have any authority to sanction or execute commercial ventures.
So, the scope for indulging in corrupt practices, as is observed in
many institutions, is almost non-existent.
Income sources
It
has powers to grant licences to commence banks, but the systems and
procedures followed are elaborate, transparent and highly broad-based.
The
RBI earns its income basically by way of interest from the Government
on latter’s borrowings. Also, it gets income from assets owned on behalf
of the Government and from the forex reserves it maintains.
Earnings
from domestic sources, much of them by way of interest receipts from
banks on their borrowings, complemented by relatively small amounts from
other sources — discount, exchange, commission, and so on — are the
other revenue streams.
These incomes earned are transparent and as per well-laid-down procedures and practices.
It
is up to the Government and banks to reduce their borrowings and manage
their funds efficiently to minimise the interests payable to the RBI.
The
apex bank has never been and can never be a commercial organisation by
statute and it is not driven by profit considerations either by design
or default.
Apart from
establishment/non-establishment expenditure, the Reserve Bank’s main
outgo is by way of agency charges/commission and printing costs that
arise in the course of performing statutory functions.
Its functions also do not envisage framing policies with a view to making money for itself or for its staff.
Expenditure front
Perhaps,
the only area where there is scope at all for CAG audit is on
expenditure, which is often kept to a minimum, thanks to
conservativeness the RBI has been practising since its inception.
The accounts of the RBI for the past 75 years bear this out.
The
Bank runs its show with minimum staff, who have been trained to be so
economical that even genuine needs are often overlooked. The position
may have changed a little post liberalisation and financial sector
reforms, with the infrastructure and operational environment getting
more modernised.
Even so, the pay and perks of the
staff may not comparable favourably with those in other central banks
and large companies in India.
Also, many of the
retired staff are drawing pittance by way of pension, which badly needs
to be brought on par with that of Central Government staff.
In
these circumstances, it is surprising that there is a vehement call to
bring the RBI under CAG audit. That the RBI is corruption-free is a
well-acknowledged.
Therefore, CAG audit without any strong and justifiable reason will only add to the expenditure of the exchequer.
The
RBI is perhaps the only institution which is self-disciplined and
self-audited, giving no scope for CAG audit in terms of coverage,
content and scope and having all possible checks and balances on ‘income
and expenditure’.
Moreover, the accounts are
extensively screened by the statutory auditors appointed in terms of RBI
Act 1934, and are made available to the Government for presentation in
Parliament.
The Government would, therefore, benefit more if it utilises the CAG’s expertise elsewhere.
(The author is a Bangalore-based financial consultant. The views expressed are personal.)
(This article was published on June 16, 2013)
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