RBI needs to be made more independent, accountable to people

It would be a healthy practice at making monetary policy and banking system more transparent to being accountable and answerable to the people instead of being hush-hush secretive in its operations

Our Reserve Bank of India (RBI) successfully stands up elegantly at par with its western counterparts like the Bank of England in the UK and the Federal Reserve (Fed) of the US. Having come into existence in April 1935, the RBI is the earliest of all India’s financial regulators; the others like the Securities and Exchange Board of India (SEBI) for capital markets and Insurance Regulatory and Development Authority (IRDA) for insurance came in much later and Pension Fund Regulatory Development Authority (PFRDA) only recently.

During its long journey since 1935 through 2014, it has seen many a vicissitude that included face-offs with the Finance Ministers of the day. Though technically, for all practical purposes, RBI is an autonomous institution, it holds consultations with the union Ministry of Finance and of late is called upon to testify before the Standing Committees on Finance of the Parliament. This is more or less on the same lines as the Fed in the US, where the appointment of its chairman by the President has necessarily to be ratified by a majority voting in the Senate after the candidate proves capability at a tough open hearing. Indeed this is a healthy practice at making monetary policy and banking system more transparent to being accountable and answerable to the people instead of being hush-hush secretive in its operations.  This practice needs to be replicated in India too.

It is only thanks to some astute governors at the RBI who had the courage of their convictions to stand firm in their efforts to insulate the Indian economy from outside shocks. The country has been able to withstand the South-East Asian and Argentinean financial crisis earlier and later the 2008 Wall Street downturn of the sub-prime lending crisis and stressed assets that resulted in a virtual collapse of American banking system requiring the US President to pour in billions to bail it out.

It is now time that our complex governance and policy making functions be shielded against the vagaries and tumult of our not-so-clean netas and sarkari babus who are bereft of the sense or integrity. This calls for the induction into RBI the selection process for top level appointments and functioning more of non-partisan and apolitical professionals and technocrats with impeccable reputation in their respective fields.  

This was exactly what RBI’s Ujit Patel Committee prescribed in its recommendations proposing the setting up of a Committee of Wise men where the RBI governor would have a vote and could also be overruled. Under the present autonomy dispensation the right vested in the governor to take the final call makes it less democratic over the decision of an appropriate committee of multi-disciplinary professional experts. This can ensure that the government of the day doesn’t make arbitrary demands on the functioning of RBI.

On 20 March 2014, speaking at a conference on the banking structure for India conducted by the Centre for Advanced Finance Research and Learning, governor Dr Raghuram Rajan said there was considerable introspection within RBI on the new regulatory architecture required for the country… at issues including the level of supervision required, how seamless the regulations should be and the level of regulatory arbitrage for its functioning. He also said that the ‘fit and proper’ criterion for directors has to be applied to ascertain their grasps over basics of the business, annual reports and risk management. He went on to say that bankers need to change their image of being poor at structuring debt with little powers over borrowers and cautioned against letting borrowers playing the bankers against each other adding that the most important step is in making effective use of the regulators well rather fragmenting them and cutting their powers.  

Now that Dr Rajan, the RBI governor has spoken his mind, the top brass has to go out in seeking the active participation and intellectual inputs of a fresh lot of outside professionals and/ or experts in the fields of accounting, audit, corporate law, financial  journalists, banking activists , technocrats, insurance and valuers for their various committees. This goes a long way in making available to the RBI their valuable inputs arising out of their experiences and exposure at the ground level that the RBI officials living in their ivory towers so woefully lack!   

The RBI’s in-house drafted Discussion and Study Papers are put out on the websites for public comments and suggestions much later in the day. They don’t give enough time. The Department concerned does not even have the courtesy to acknowledge the painstakingly complied submissions listing suggestions and comments sent in by the professionals in banking and audits.
(Nagesh Kini  is a Mumbai-based Chartered Accountant turned activist.)



MG Warrier

3 years ago

RBI needs a revamping to prepare the institution for the role expectations of 21st Century. This is getting dodged for various reasons. Everyone including the outgoing Deputy Governor Chakrabarty talks on different aspects of such an overhaul. Yesterday(April 24) the Deputy Governor talked about the need for RBI to be accountable to Parliament. There can be no two views on this.
Preamble of the Reserve Bank of India Act, 1934 had inter alia stated: “…but whereas it is expedient to make temporary provision on the basis of the existing monetary system, and to leave the question of the monetary standard best suited to India to be considered when the international monetary position has become sufficiently clear and stableto make it possibleto frame permanent measures;
It is hereby enacted as follows:-“
The opportunity for the review envisaged actually came when GOI appointed the Financial Sector Legislative Reforms Commission(FSLRC) which submitted its report sometime back. The plethora of issues considered by the FSLRC did not allow the Commission to focus on the kind of change envisaged in the preamble of the RBI Act. The ‘cut & paste’ FSLRC report which imported ideas not necessarily suitable in the Indian context, instead of trying to build on the strength of RBI attempted to re-invent a new institutional structure.
It is not the lack of RBI’s allegiance to legislative supremacy that is at the root of the present friction between GOI and RBI. The assertion of ‘ownership rights’ by lower level functionaries of GOI over all public sector organisations including statutory bodies like RBI and their interference in the legitimate functioning of institutions even in HR issues deny the top managements of these institutions a level playing field with their counterparts elsewhere.

mm sundram

3 years ago

it is a very good article on RBI. i agreed with and the comments made by CR Mohanraj and NAir. i experienced lot with the RBI but the RBI official still not learnt anything except enjoying the Taxpeyers monies comfortably. I seen lot of RBI official are playing in the Computer during the office hours. the never worked. how will they take action. i brought the proven Fraud by HDFC bank branch of NEW Delhi to the RBI and submitted lot of records. the said bank defrauded me by allowing Delhi based NBFC namely RELIGARE FINVEST LTD to open a saving bank account against my name in DELHI and then permitted the same NBFc to operate the same account without my knowledge. but the RBI Delhi official are comfortably enjoying the monies of taxpayers and also with the facilities provided by the said NBFC. The RBI Mumbai still not resolving the complaint which is pending for 6 long years. Ombudsman conveniently taking refuge under the "FRAUD" and jurisdiction points. Now the matters are lying in the OFFICE of Dr. Rajan. making call every two days. There is no accountability or responsibility.


3 years ago

At the moment RBI does not seem to be accountable to people.

People will not find a single email ID of any RBI official revealed in their web-site. When people post in the small window provided for "Contact", no acknowledgement is received.There is no way to remind RBI.

In her article "Get More Customer-friendly says Rajan", Madam Sucheta Dalal has rightly pointed out that "At the moment, most consumers are convinced that the banking ombudsman’s offices, often, actively collude with bankers in rejecting their claims. A starting point would be to study the decisions by the ombudsmen, in just a couple of banks which have the maximum complaints, and examine how they have dealt with the complaints. The findings will be an eye-opener for Dr Rajan".

Her observation is very, very true and Ombudsmen mostly are more Bank friendly than people friendly. RBI's intervention is overdue.

The problem gets compounded when people have no way of approaching any concerned RBI official to enlighten them with proof, about the unhealthy collusion and nexus of Bankers and Ombudsman.

RBI should look into this grievance of people and entertain inputs from people so that Ombudsman is under check and does not become a rule unto himself.

I am so happy that Mr Nagesh Kini has written this useful and timely article "RBI needs to be made more independent, accountable to people".


Mohan Raj

MG Warrier

3 years ago

Copied below is my response to a report of September 15, 2010 in the Economic Times. Being reproduced to draw attention to the fact that the focus of this article is on an issue which has been neglected for years and a meaningful debate at this juncture is most appropriate:
“This refers to the report ‘It’s not over, RBI again writes to finmin on autonomy’ (ET, September 15). Of late, the finance ministry has been having problems with almost all regulators. It is not the other way round. Because of RBI’s premier position, the issues in which the central bank is involved get media attention. The proposal to super-impose a body to oversee the functioning or coordinate among various regulatory bodies and give it a permanent and legal status had ab initio met with the response that government is finding an alternate route to encroach on the autonomy of individual regulators. Subsequent developments have only proved the initial fears right.

The sound health of the financial sector can be ensured only by allowing all regulators and supervisors in the sector including RBI, SEBI and IRDA to feel the freedom to perform their mandated responsibilities efficiently, within the statutory framework. Presently, their well-intended policy initiatives and even administrative actions are being pre-audited and guided by a Finance Ministry which itself is suffocating under compulsions of coalition politics.

PM who knows the harm strained relationships between regulators and FM can cause to the economy must immediately intervene and try for a breakthrough. If the buck doesn’t stop there, we will see more and more of controversies like the present one, capable of destroying the gains made by the Indian economy, mostly during the period Dr Manmohan Singh was in charge.”

Weibo IPO reveals a company struggling with censorship

Weibo, ‘China’s Twitter’, started offering shares on NASDAQ last week. Its regulatory disclosures reveal a company’s balancing act between censoring too much and too little.

Starting 17th April, investors can purchase shares of Weibo, sometimes called “China’s Twitter,” on NASDAQ. The company’s regulatory filing with the SEC reveals details not previously known about Weibo’s censorship apparatus, which we wrote about last year.

Weibo, like all Internet publishers and providers in China, is prohibited from letting their users display content that is obscene, fraudulent, defamatory or otherwise illegal under Chinese laws. The content prohibitions also forbid material that “impairs the national dignity of China,” “is reactionary,” “superstitious,” or “socially destabilizing.”

As required under SEC regulations, the company must list for investors’ potential risks that might affect its share price. Weibo is up front about the risk the Chinese government’s regulation of content poses to its ability so succeed. “Failure to [censor] may subject us to liabilities and penalties and may even result in the temporary blockage or complete shutdown of our online operations.”

Under a section titled "Risks Relating to Doing Business in China," the company cites as a material risk not being able to censor user content quickly enough for the Chinese government, and describes a three-day period in March 2012 when Weibo disabled commenting completely so censors could "clean up" all content regarding a topic. The company did not disclose the topic but the Wall Street Journal reported in March 2012 that China put temporary restrictions on Sina, Weibo's parent company, as well as Tencent, a rival microblogging service, and that it was “detaining individuals that it accused of spreading rumors of a coup attempt in Beijing.” That week, according to the Journal story, Sina and Tencent placed identical notices on their web sites, warning users that the ability to comment on posts was being shut down for three days.

In the regulatory filing, Weibo says it doubts it can censor its users adequately enough to satisfy the government. “Although we attempt to monitor the content posted by users on our platform, we are not able to effectively control or restrict content (including comments as well as pictures, videos and other multimedia content) generated or placed on our platform by our users.”

For Weibo, censorship that’s adequate for the government may alienate consumers. As Wired reported today, after a government crackdown threatening to jail users who post “inaccurate” messages if it is viewed over 500 times, Weibo's users started to leave the service. Censorship, according to Weibo’s filing, can “adversely affect our user experience and reduce users’ engagement and activities on our platform as well as adversely affect our ability to attract new users to our platform.”

Also new in Weibo’s filing is a sense of the scale of their operations. Little was previously known about how many human sensors Weibo employs, or how much it costs the company to maintain the staff and the technology to monitor the over 100 million posts its users create per day, though this has been the subject of much research. Weibo’s filing with the SEC claims they have a little more than 2,000 employees total, which is fewer than the number of censors alone researchers believe Weibo employs. That might mean the researchers’ estimates are wrong or that the censors are employed by a contractor.

A ProPublica investigation last year republished images deleted by censors on Sina Weibo, along with translations and explanations of the images themselves.

To see the most recent censored posts detected on Sina Weibo, visit

Read Weibo's section on risk related to censorship below, or read the full regulatory disclosure.

Risks Relating to Doing Business in China

Regulation and censorship of information disseminated over the internet in China may adversely affect our business and subject us to liability for information displayed on our platform.

The PRC government has adopted regulations governing internet access and the distribution of information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, impairs the national dignity of China, is reactionary, obscene, superstitious, fraudulent or defamatory, or otherwise violates PRC laws and regulations. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the website.

In addition, the MIIT has published regulations that subject website operators to potential liability for content displayed on their websites and for the actions of users and others using their systems, including liability for violations of PRC laws prohibiting the dissemination of content deemed to be socially destabilizing. The Ministry of Public Security has the authority to order any local internet service provider to block any internet website at its sole discretion. From time to time, the Ministry of Public Security has stopped the dissemination over the internet of information which it believes to be socially destabilizing. The State Administration for the Protection of State Secrets is also authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the dissemination of online information.

Although we attempt to monitor the content posted by users on our platform, we are not able to effectively control or restrict content (including comments as well as pictures, videos and other multimedia content) generated or placed on our platform by our users. In March 2012, we had to disable the Comment feature on our platform for three days to clean up feeds related to certain rumors. To the extent that PRC regulatory authorities find any content displayed on our platform objectionable, they may require us to limit or eliminate the dissemination of such information on our platform. Failure to do so may subject us to liabilities and penalties and may even result in the temporary blockage or complete shutdown of our online operations. In addition, the Judicial Interpretation on the Application of Law in Trial of Online Defamation and Other Online Crimes jointly promulgated by the Supreme People’s Court and Supreme People’s Procuratorate, which became effective on September 10, 2013, imposes up to a three-year prison sentence on internet users who fabricate or knowingly share defamatory false information online. The implementation of this newly promulgated judicial interpretation may have a significant and adverse effect on the traffic of our platform and discourage the creation of user generated content, which in turn may impact the results of our operations and ultimately the trading price of our ADSs. Although our active user base has increased over the past several years, regulation and censorship of information disseminated over the internet in China may adversely affect our user experience and reduce users’ engagement and activities on our platform as well as adversely affect our ability to attract new users to our platform. Any and all of these adverse impacts may ultimately materially and adversely affect our business and results of operations.



No secrecy in deletions of voters in Pune, says Gadre

Responding to criticism of incidents where several people from Pune found their names were missing from the voter lists, the state chief electoral officer said the EC deleted 50 lakh names in August last year and also published the list online

Maharashtra chief electoral officer (CEO) Nitin Gadre on Monday said, problems arising out of deletions in electoral rolls are inevitable as there is no fool-proof measure against errors.

"The exercise of deletions was concluded in August 2013 and names of as many as 50 lakh people were deleted. Through lot of publicity, we gave time to people to correct mistakes if any in the voter rolls, he said.

"CDs were given to all political parties and the deleted list was published on the website. Details of the proposed deletions were also circulated to political parties. There was no secrecy in the deletions," Gadre added.

He was responding to criticism of incidents where several people from Pune found their names were missing from the voter lists and protests were staged outside the collector's office.

After August 2013, 40 lakh new voters were added in the summary revision. "Another 16 lakh were added after 31 January 2014 including 6.8 lakh after March nine this year. Hence, a total of 56 lakh voters have been added which includes 23 lakh first time voters," he said.

Gadre said in Pune, 6.22 lakh names were deleted out of which 1,400 complained that their names have been mistakenly deleted.

"The scrutiny of the names is in progress and the Election Commission of India will take an appropriate decision in this regard," he said.

In Mumbai, he said 6.5 lakh names have been deleted during revision of electoral rolls. "So far, we have not received official complaints from citizens that their names have been mistakenly deleted," Gadre said.

He said for the first time, a massive deletion exercise was undertaken last year. We agree it is not fool proof because about 60,000 people were in the exercise to scrutinise electoral roll of eight crore. A person might not be found in the residence during one or two visits of the officials, neighbours might not know and the person may turn up after two months," he added.

Gadre said District Collectors of Mumbai city and Mumbai suburban will address the media on Tuesday giving a chronology of the deletions and how all stakeholders have been kept in the loop throughout.




3 years ago

The enrolment process is assigned to local government employees who are least interested in this type of work. All leaders only pay lip service to democracy while trying their best to weaken it. Hence, this issue is nobody's child. Only NGO's can do something by filing a PIL to see that the whole process is simplified and foolproof.


3 years ago

I tried to check whether my name is on the electoral rolls - if you see how difficult it is to navigate through the site and check your name ... it is frustrating to say the least.At the worst, it feels like some kind of conspiracy.

IRCTC site seems so easy to use !

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