RBI’s decision to strip Dr KC Chakrabarty of many important portfolios raises broader issues about transparency in the central bank’s functioning
The Reserve Bank of India's (RBI) decision to strip deputy governor Dr KC Chakrabarty of many of his powers on 3rd August has caused a flutter in the banking and financial world. While there are plenty of those who correctly argue that the outspoken Dr Chakrabarty had no business expressing a view different from the official line so soon after the monetary policy (he said that the central bank would have no option but to raise its key policy rates more to control runaway inflation), it has also raised issues about the central bank's independence and whether contrary views are permitted within the central bank.
On 3rd August, the RBI stunned bankers by stripping Dr Chakrabarty of important portfolios such as urban and rural cooperative banks, administration, personnel management, Right to Information and Payment & Settlement Systems.
We learn that Dr Chakrabarty has been very vocal about his views within the bank and even had a spat of sorts with some bank chiefs in a meeting prior to the announcement of the credit policy. Bankers tell us that the RBI itself was keen to raise rates more aggressively, but softened its decision after a meeting with the finance ministry.
These bankers say that while the RBI governor may have publicly protested the finance ministry's move to encroach on its autonomy with regard to settling jurisdiction issues, it is a fact that the governor takes cues, if not instructions, from the finance minister before deciding interest rate changes. This time too, there are rumours that the RBI softened its stand after a meeting at Delhi.
Interestingly, while governor D Subbarao may have stripped Dr Chakrabarty of key portfolios, he personally was a hot topic of discussion on the banking grapevine. Having taken a stand against the finance ministry's views on the Security & Insurance Laws (Amendment and Validation) Bill 2010 on regulatory jurisdiction, there were rumours that Dr Subbarao would step down. However, the Bill has been passed without any such move on his part.
Interestingly, while Dr Chakrabarty's outburst was an anomaly, he has plenty of sympathisers who are raising issues that are bound to haunt the RBI in the coming days. For instance, many question whether the RBI allows any dissent in the discussion process. They also want some transparency and accountability in its decision-making process. For instance, it is pointed out that barring the European Central Bank, most leading central banks publish monetary policy discussions in the public domain after a lag of six to eight weeks. It is these discussions that reveal to the world whether a specific central banker is a policy hawk or a dove. More importantly, they are forced to be accountable for their views and argue them out.
Without any transparency whatsoever, in any aspect of RBI's functioning, there is no way for people to know the process of arriving at policy decisions. For instance, is monetary policy dictated by a powerful governor or the result of a frank and open discussion? Does the RBI then stick to its decisions or is it influenced by the finance ministry to modify its stand?
If governor Dr Subbarao is really keen on preserving RBI's autonomy, voluntary disclosure and more transparency will be an important step. If the RBI decides to release its discussions with a lag, it will be the best way of guarding against interference and influence by the finance ministry.
By the way, if the RBI does this, it must take care not to go the way of the Securities and Exchange Board of India. The capital market regulator took the bold decision to put its board agenda and the minutes of its decisions in the public domain. But the manner in which it functions and what is reported to the public has done nothing to enhance confidence in its functioning.
Mumbai: Having sold a record one lakh scooters in a span of just 10 months, auto major Mahindra & Mahindra (M&M) is now firming up plans to enter the domestic motorcycle market by end-this year, reports PTI.
"We have achieved a milestone by selling one lakh scooters in just 10 months as against a set target of 18 months. Our plan now is to enter the motorcycle market by end of this year," Mahindra Two Wheelers' president Anoop Mathur told PTI here.
"We are working on a unique product that will be assembled in the same plant where our scooters are manufactured," he said.
The company is designing the motorcycle at its Italy-based Engines Engineering, which was acquired by the Mahindra group in 2008.
Presently, the company's Pithampur facility (where it makes its scooters) has a capacity to make five to six lakh scooters annually.
Buoyed by the robust market response for its scooters, M&M now aims to double its scooter sales from one lakh to two lakh by December 2010.
"What we have achieved in 10 months, we (would) like to achieve in (the next) five months. We plan to sell another one lakh scooters in the next five months," he said.
The company clocked a 329% jump in its two-wheeler sales in July at 12,033 as against 2,808 units in the year-ago period.
"Our July sales have given us the confidence that we can achieve this other milestone in the next five months," the M&M official said.
The Mahindra group had picked up an 11% stake in Kinetic Motor two years ago to gain an entry into the two-wheeler segment. The group had also acquired Engines Engineering of Italy, a design house for two-wheelers, in 2008.
Innovation will hold the key going forward, Mr Mathur said, adding "innovations will help us become a significant player in the global market."
"We aim to establish the Mahindra two-wheeler brand in the international market in the next few years," he said.
The company sees more potential in rural markets in India and plans to significantly increase its dealership network in Tier II and III destinations.
"Presently, we have 350 dealers pan-India and plan to add 50 more this fiscal," he said.
M&M, which is currently exporting two-wheelers to Bangladesh, Nepal and Sri Lanka, is eyeing more global markets.
"We will be exporting our two-wheelers to Cambodia, South Africa and a few other countries in the coming days. Our dream is to become a global player," he said.
Pharmaceutical company Lupin Ltd said it appointed Paul McGarty as president of its US-based subsidiary, Lupin Pharmaceuticals Inc.
Mr McGarty has over 25 years experience in the pharmaceutical industry spanning across brand and specialty pharmaceutical companies, the company said in a release.
On Tuesday, Lupin shares rose 0.7% to Rs1,916 on the Bombay Stock Exchange, while the Sensex closed 0.2% higher at 18,114 points.