The present RBI Governor's
period is some thing unique in the history of RBI. He took charge when
there was global financial turmoil. and he had to ensure that Indian
Financial system and the economy escaped unhurt because of the crisis.
Subsequently, he had the misfortune of fighting both inflation and
growth without the support of the Govt and the fiscal policy measures.
Not only he failed to get the support but also had to face the
displeasure of the Govt in not yielding to its pressures to dance to
its tunes. He had to face the humiliation when the Govt set up the FSDC
and made the RBI as any other institution like SEBI and IRDA without
having any supremacy which as a Central bank of the Country it is
entitled to. Adding insult to injury, the Government started giving
directions to banks directly bypassing RBI. This gave the banks an upper
hand and they gave the impression that they cared for more the Govt
than the RBI. The SBI the biggest commercial bank instead of giving
full support to RBI to ensure success of its monetary policies opposed
RBI's every move to curry favour from the Government.The banking system
failed both RBI and the Govt leading to such a pathetic condition of
the economy.The banks tried to undercut both and landed themselves in
liquidity crisis bringing down deposits, adding to NPAs and creating
unprecedented mismatch between assets and liabilities. SBI chief has
been against RBI policies and has been some sort of indirect support to
other banks in challenging RBI measures. The result is the Govt suffers,
the economy suffers, the banking system suffers and RBI has to tackle
everything together. But the Governor will prove to be right in his
thinking and actions if the Govt and the banks dare to introspect as to
what they have done to RBI during the last three years in particular
and realise their follies..Governor can keep his head high for his
boldness and the challenges he faced to maintain the Reserve Bank's
importance and supremacy without yielding to the pressures of the Govt
and without having the normal cooperation and support of the banking
system.Subba Rao's era will have some special place in RBI and Indian
Economy's history for the challenges he faced both from the Govt and the
banks. The economists will reailse the important role played by RBI
during the most inactive performance of the Govt when they introspect
in leisure.
Dr.T.V.Gopalakrishnan
