Rajeev Chandrashekhar calls for blanket ban on borrower being appointed as RBI director

Rajeev Chandrashekhar, member of the Parliament (MP) and promoter of BPL Mobile, has suggested the Finance Ministry to put a blanket ban on any borrower or creditor of the Indian banking from being appointed on the board of the Reserve Bank of India.

Mr Chandrashekhar, in a letter to the Finance Minister, said, "I believe that there is a need for a blanket ban on any borrower or creditor of the Indian banking system, being appointed to the Board of the Reserve Bank of India (RBI)- given the RBI's role as a regulator of Indian Banks, this represents a potential and serious conflict of interest which is extremely difficult to regulate."

Earlier, while replying to an un-starred question in the Rajya Sabha, Namo Narain Meena, minister of state for Finance, said that the Appointments Committee of the Cabinet (ACC) appoints directors on the board of RBI. The union government forwards bio-data of the candidates to Central Board of Direct Taxes, Revenue Intelligence, Central Excise Intelligence, Department of Enforcement and the RBI for conducting a due diligence.

Based on the reports from the investigating agencies and independent scrutiny of the bank accounts of the candidate by the RBI, the proposals are recommended to the ACC for appointment, the minister said in a written reply.


Why no commission to inquire into illegal mining of coal?

Last month, the Centre appointed a commission to probe into illegal mining of iron and manganese ore. But it is strange that worse activities in the coal industry are going on unhindered

The Centre has appointed a commission to probe into the illegal mining of iron and manganese ore in various states, to curb these illegal activities. This is long overdue. But the question being asked already is why a similar investigation is not being undertaken on illegal coal mining? 

Last month, the Centre appointed MB Shah, retired judge of the Supreme Court, to probe into illegal mining of ore. Mr Shah has been asked to submit a report in 18 months and file an interim report, if required.
Like in iron and manganese ore mining, the coal industry is also affected by illegal mining, corruption, pilferage, environmental issues, the mafia and Maoists. It's a chronic problem that haunts India's energy dream and requires to be addressed without delay.

"We need such a commission to probe into illegal mining of coal. Today, illegal mining is becoming an industry and in with regard to illegal mining of coal, the mafia is working in vast areas of the country," Jibon Roy, former member of parliament and a trade union leader, told Moneylife. 
However, it is also said that the government's decision to appoint the commission seems to be a politically motivated step as the decision was taken after Bharatiya Janata Party (BJP) members and powerful miners were accused of large-scale illegal mining in Bellary district in Karnataka, as well as in neighbouring Andhra Pradesh.
"I don't want to comment whether it is a politically-motivated decision or not. It is a welcome decision that the government has appointed the commission to probe into illegal mining of iron and manganese ore even if it is a political-motivated step," Mr Roy said.

As Moneylife reported earlier, billions of rupees worth of coal is taken away with the help of Maoists and the mafia every year in major coal-producing states of  Jharkhand and West Bengal. (http://www.moneylife.in/article/81/10378.html )
"The government should look into the whole issue of illegal mining in every state. It is all vested interests, the government should not fall prey to vested interests and inquire into all kinds of illegal mining," BJP national spokesperson Prakash Javadekar told Moneylife. 
The central government is eager to bridge the fiscal deficit by divesting its stake in state-owned mining companies, but when it comes to addressing crucial issues like illegal mining it is trying to settle political scores using such serious problems.
The commission may take the services of any investigating agency of the central government in order to effectively address its terms of reference, the mining ministry stated.

Following are the terms of reference of the commission set up to inquire into illegal mining of iron and manganese ore and why a similar inquiry is necessary into the coal problems.

  • The commission will inquire into the nature and extent of illegal mining and trade and transportation of iron ore and manganese ore and to identify the persons, firms, companies and others responsible for this.

(According to a report, about 7,20,000 tonnes of coal is smuggled every year from Jharkhand by organised syndicates of the coal mafia, who are supported by local politicians.) 

  • The tampering of official records, including records relating to land and boundaries to facilitate illegal mining, etc. and the extent to which the management, regulatory and monitoring systems have failed to deter, prevent, detect and punish illegal mining, etc, and the persons responsible for the same.

(Coal India Limited (CIL), which accounts for more than 80% of the coal production in the country, is facing hundreds of legal proceedings against its employees and subsidiaries for corruption and other cases. The company has also been charged for alleged encroachment of land for carrying on mining activities and 236 service matters have been filed by its employees.) 

  •  The overall impact of such illegal mining, etc, in terms of destruction of forest wealth, damage to the environment and to the livelihood and other rights of tribal people, forest dwellers and other persons in the mined areas, and the financial losses caused to the central and state governments, etc.

(According to a media report citing unnamed sources, CIL has scaled down the production target by 6.5% to 486million tonnes (MT) from 520MT following delays in environment approvals for various projects. The environment ministry's announcement of 'no-go' areas for mining for a few of CIL's reserves, the company might have taken the decision to reduce production targets.)


Banks raising high cost funds to tide over liquidity crunch

New Delhi: Faced with tight liquidity condition, banks have started offering high interest rate of 9.5% on certificate of deposit (CD), 125 basis points more than what they are giving to fixed deposit holders, reports PTI.

Currently, the rates of CD, an instrument generally issued by commercial banks with maturity varying between seven days to one year, are varying between 9.2% and 9.5% depending on the banks, treasury head of a public sector bank said. A CD bears a maturity date and a specified fixed interest rate.

At the same time, 1-2 year fixed deposit rates of some leading banks currently stand at 8.25%.

One year CD rate is always higher than 10-year government paper. However, in the last few weeks the corridor has widened substantially.

“The CD rates are substantially higher than the 10-year government bonds as well as retail fixed deposit rates,” Dhanlaxmi Bank treasury head Manish Sarraf said.

With deposits growth yet to pick up, banks are forced to offer higher rates on CDs to meet their resource requirements, he said.

The liquidity condition is tight and banks are borrowing over Rs1 lakh crore from the Reserve Bank of India (RBI) under liquidity adjustment facility (LAF), he added.

Since 8th November, banks have borrowed an average over Rs1 lakh crore through the liquidity adjustment facility of RBI.

According to treasury head of another private sector lender, tight liquidity condition is likely to continue for next two months or so.

Next week, the system would be drained out of Rs50,000 to Rs60,000 crore on account of advance tax payment due on 15th December.

Spending on the part of the government can ease the liquidity situation.

“I do think, that in the second half of this fiscal, and particularly in the last quarter, public spending will increase, and as a consequence of this, the liquidity situation in the system will improve,” PM’s Economic Advisory Council (PMEAC) chairman C Rangarajan had said last week.

“I think RBI will take necessary steps to ensure that adequate liquidity is present in the system,” he had said.


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