It’s clear that, the finance ministry is the most important place in India after the Prime Minister’s Office --this sounds awkward but becomes evident when seen against the recent reshuffling in ministries, when the serving home minister was called to hold the command of economy. This marks the moral bankruptcy, as the new finance minister will be hardly reckoning the plight of the economy which originated through the clash of interest between real and rave components -- moreover, he lacks the critical tributes like acceptance and expertise for handling a diverse economy like India’s.
This mischance will boost many inside the RBI, who earlier relied on static and soft monetary policies that at least in last one-and-half-years have cut India from both of its central economic ideologies based on ‘half-willing socialism’ and ‘half-sighted dreams of reform’. Among the list of blunders, the RBI’s extraneous policy regarding the licensing of new banks under the private sector refers the unique misunderstanding of the whole issue. It’s obvious that, the RBI is not keen on banking licenses for corporates, not to work with any neo-egalitarian model of banking based on ‘maximum happiness’ of clients of different types and figures but for securing the power to superseded the boards of existing banks and leaving the case of banking expansion in its backyard.
The insistence of the central bank on amendments to the Banking Regulation Act by the Parliament as a prerequisite for any potential flex on banking licensing is flawed and objectionable. It may be true that none of India’s NBFCs are fit enough for the award of baking business, though the many interested public sector entities could be taken for a ride under the joint venture in private partnership. Also, there would have been nothing wrong by downing the obstination on allowing corporate world at large to enter the fray of banking based on competency, not by the channel of cronyism.
By the impression of numbers, India’s corporate sector is performing but by the spirits, in no manner it’s worth of calling ‘robust’. By an example, almost all heads of India’s private sector banks have downplayed the chances for few more private banks, citing the already high competition and its aftereffects on their businesses. These were all untoward statements with no technical precision or understanding of a height of possible stagnation with which India’s banks will be reckoning sooner than the later. Banking should be means for the profit but not for the oligopoly; unfortunately, the reverse is the case in India today -- not surprising in present scenario, if the SBI has lost its tag of being the most valued bank in market terms from one of its shrewd peers.
Notwithstanding its actual role, the RBI is maintaining silence over the future growth of India’s financial sector, which has been safe more for its undersized ambition than the claimed ‘prudence’. This is totally ironic watching the curtain down on the future of India’s more than 55 percent unbanked citizens and overall the growth of financial sector at large. The path India’s banking has travelled so far hardly allows one to part the views between progressivism and ultra-materialism, here the things have to be seen in the right context. Public sector banking was more a hedging intervention, so it would be unfair considering the nationalisation of banks as the complete socialistic manifestation. PSBs/RRBs played their role immensely well and would do more good under the perfect competition around the every nook and corner.
Not even remotely, the arrival of few more banks would harm their business; contrarily it would help the sagging market sentiments to get an upward touch. Instead fearing and sharing those misleading apprehensions, the RBI should create a true healthy work culture in PSBs/RRBs, which are remarkable by their business and reach.
RRBs especially deserves much better deal in terms of human resource policies. It’s shocking to see the RBI/finance ministry’s dualism in taking them as at par with the PSBs, where the service benefits like pension is now the part of system. This discrimination should be ended by introducing the service provisions including of pensions for the RRBs employees on the line of PSBs With more than 17,000 branches across the India’s rural heartlands and the small towns, RRBs can be seen as the engine of rural growth in India -- so they need an immediate broad unification at the national level with an effective professional board, which can lead the rural banking for more inclusive businesses.
India’s jobless growth or the slow industrial momentums are the outcome of chronic passivism from the RBI for the mass issues. It’s not more than an excuse in passing the fault on global financial uncertainty by the India’s policy regime for the present mess-up at domestic front. The last two decades of India’s growth story was based on the domestic consumption strength, rather than on any other fancied factors. This should be the time of reckoning by India’s central bank, moving clearly and with a goal must be the basic catch which it has been missing for long under its mix of placid shows off and painful affects. Until India’s central bankers will rise from their very long slumbering, any hope to see the financial sector on bloom would be near about the day dreaming in a rainfed season like the present!
Atul Kumar Thakur
August31st2012,Friday
Email: summertickets@gmail.com
(Published in Governance now on August27th 2012/ http://governancenow.com/views/columns/rbis-unsavoury-policy-dictates )
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