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RBI: Time to initiate changes from within?
The decision of Dr Raghuram Rajan not to continue or seek second term as governor of Reserve Bank of India (RBI) has finally ended months of speculations. However, at the same time, the way this issue was being kept alive through media, brings some other important issue of reforms within the central bank, especially the casual approach in appointing the top executives. 
We should better use this opportunity to go deeper into the legacy of the RBI, which has made its top management vulnerable to public criticism. It is time we had a re-look at our own casual approach to employment at top level, especially in organisations like RBI. 
Allow me to quote a paragraph from Sir Thomas Munro’s 31 December 1824 observations appearing in East India Papers (Vol iii, London 1826, quoted in Economic History of India, Romesh Dutt, CIE) to open the discussion:
“Even if we could suppose that it were practicable without the aid of a single native to conduct the whole affairs of the country both in the higher and in all the subordinate offices, by means of Europeans, it ought not to be done, because it would be both politically and morally wrong. The great number of public offices in which the natives are employed is one of the strongest causes of their attachment to our Government. In proportion as we exclude them from these, we lose our hold on them, and were the exclusion entire, we should have their hatred in place of their attachment, their feelings would be communicated to the whole population, and to the native troops, and would excite a spirit of discontent too powerful for us to subdue or resist. But were it possible that they could submit silently and without opposition, the case would be worse, they would sink in character, they would lose the hope of public office and distinction all laudable ambition, and would degenerate into an indolent and abject race, incapable of any higher pursuit than the mere gratification of their appetites. It would certainly be more desirable that we should be expelled from the country altogether, than that the result of our system of government should be such a debasement of a whole people.”
I found the above thoughts relevant in the context of the treatment meted out to the staff of India’s central bank since its establishment on 1 April 1935 till date. At the time of establishment, the ruling British government did have vested interest in ensuring that the top management of RBI ‘obeyed’ the government. The constitution of the Bank’s central board and appointment of RBI Governor and his deputies took care of this objective. “Natives prohibited” approach in decision-making can be traced to this need. The irony is, even today, it is ensured that only two of the five top positions in RBI, including governor and four deputy governors, are held by those who joined the bank at lower levels. This top management is dependent on the team of executive directors (now their number is in two digits!) who are career central bankers with over 20 years of professional central banking experience with exposure to several work areas including trainings abroad.
All governors, without exception, have imbibed the institutional culture once they entered the sanctum sanctorum and have tried to protect the mandate contained in the preamble of the RBI Act 1934.
RBI, as an institution, has accepted external leadership at the top and for the RBI family, the presence of three to four 'outsiders' as Governor and his deputies was a matter of pride and confidence. These birds of passage have benefited by their stay at Mint Road, as much as the institution has gained from their leadership and guidance. 
It may not be possible to change things overnight. Nevertheless, the need for change has to be understood. There is a practical side to the issue. In RBI, very few came as deputy governors at a young age and became governor later. Even the average incumbency of governors is low. Dr Rajan is the 23rd RBI governor and the institution has been in existence only for the last 81 years, making average stay less than four years. RBI, in a way, becomes a training establishment of sorts for top central banking professionals whose subsequent service is not available for the institution. Three things can be done to improve the situation:
  • Fairly good number of officers is being recruited at the second level of officers’ grade in RBI every year. By offering a reasonably market-related remuneration package, RBI can afford to recruit better talent at this level who, over time, can aspire to go to top positions.
  • Offer better terms for the positions of executive directors and above and, if necessary by increasing the number, keep some of these positions open for ‘direct’ recruitment from the open market including from officers at lower levels from within the bank. This will improve the availability of internal talent for higher positions.
  • Gradually, change the age profile of deputy governors, so that some of them can migrate to the highest level.
(MG Warrier is a former General Manager, Reserve Bank of India and author of the 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India".)



B. Yerram Raju

4 months ago

The team of Governor and his deputies has been bringing out collective wisdom in all the RBI policies although every decision goes to the credit or discredit of just the Governor because of the unbiased view that the later brings to the table. There are only 16 doctorates in economics or related disciplines in the RBI. The discipline is akin to that of the Defense Services. While the views of peers are respected their independence is seen at arm's length.
Mr Warrier has a point. It is good to see the EDs and Dy.Governors between the ages of 45 and 50 years when their contribution to the growth of institution and their personal growth would be substantive. It is however desirable to have a Governor from the external cream to stay away from internal preferences and prejudices as much as from external pressures.


MG Warrier

In Reply to B. Yerram Raju 4 months ago

The poit made is well taken. But let us also credit RBI with continuous efforts in institution-building in the financial sector and for maintaining a workforce which has been able to carry on the developmental efforts in addition to the mandated role of RBI . The number of doctorates 'inside' RBI may be small. But, several 'occasional papers' brought out by RBI, internal research on policy issues and so on would have been worth submission for doctorates outside. Somehow, may be because I spent around 20 years in close proximity with the research and planning departments in RBI, I am inclined to assert that the institution has done justice to its mandated role so far. This article is about further scope for improvement.

B. Yerram Raju

In Reply to MG Warrier 4 months ago

Agreed. There is always scope for improvement.

Milind Nadkarni

4 months ago

Completely agree, If we start adopting the suggestions mentioned above in many government institutions (Air India ia another contender for these suggestions), nation will benefit immensely in longer run.

Feed Me, Pharma: More Evidence That Industry Meals Are Linked to Costlier Prescribing

Evidence is mounting that doctors who receive as little as one meal from a drug company tend to prescribe more expensive, brand-name medications for common ailments than those who don't.


A study published online Monday in JAMA Internal Medicine found significant evidence that doctors who received meals tied to specific drugs prescribed a higher proportion of those products than their peers. And the more meals they received, the greater share of those drugs they tended to prescribe relative to other medications in the same category.


What the New 2018Collaborative Media' Can Mean


  • Search through nearly 15 million records to see if your doctor has received money from a drug or device company. Search for your physician.
  • Get the data that powers this investigation. A complete, digital download is available for purchase in the Data Store.

The researchers did not determine if there was a cause-and-effect relationship between payments and prescribing, a far more difficult proposition, but their study adds to a growing pile of research documenting a link between the two.


A ProPublica story published in March found that doctors who took payments from the pharmaceutical and medical device industries prescribed a higher proportion of brand-name medications than those who didn't. It also found that the more money a doctor received, the higher the percentage of brand-name drugs he or she prescribed, on average.


Similarly, a Harvard Medical School study published in May found that Massachusetts physicians prescribed a larger proportion of brand-name statins 2014 the category of drugs that treat high cholesterol 2014 the more industry money they received. There was no significant increase in brand-name prescribing for those who received less than $2,000.


What makes the current study different is that it looked at specific drugs.


In an editor's note, Dr. Robert Steinbrook wrote that the recent analyses "raise a broader question. Is it necessary to prove a causal relationship between industry payments to physicians and the prescribing of brand-name medications?"


Other than for research and development, and related consulting, Steinbrook wrote, "it is already evident that there are few reasons for physicians to have financial associations with industry. Outright gifts, such as meals, may be legal, but why should physicians either expect or accept them?"


Holly Campbell, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry trade group, said the latest study creates more confusion than clarity. In part, that's because the researchers acknowledge that they could not determine whether the drugs were prescribed before or after doctors received meals paid for by companies.


"This study cherry-picks physician prescribing data for a subset of medicines to advance a false narrative," Campbell wrote in an email. "Manufacturers routinely engage with physicians to share drug safety and efficacy information, new indications for approved medicines and potential side effects of medicines. As the study says, the exchange of this critical information could impact physicians' prescribing decisions in an effort to improve patient care."


Since 2013, the government has required all pharmaceutical and medical device makers to publicly report their payments to doctors. The government has released data on transactions from August 2013 to December 2014; data from 2015 is set to be made public next week. Those payments can be searched in ProPublica's Dollars for Docs tool.


In the study released today, a team led by Colette DeJong at the University of California San Francisco examined four classes of medications, including those that treat high cholesterol, heart rhythm disorders, high blood pressure and depression. The researchers identified one heavily marketed brand-name drug in each class 2013 Crestor, Bystolic, Benicar and Pristiq 2013 for which there are cheaper, equally effective options.


DeJong and her colleagues then looked at physicians who received meals specifically tied to those drugs (companies have to list the products associated with each of their payments) and their 2013 prescriptions in Medicare's drug program. The researchers excluded physicians who received other types of payments2014such as for promotional speaking and consulting2013in an effort to isolate any relationship to the meals alone.


Though only a relatively small percent of physicians who prescribed the drugs examined in the study received payments from their makers, those doctors prescribed the drugs more often than other doctors.


Physicians who received meals related to Crestor on four or more days prescribed the drug at almost twice the rate of doctors who received no meals. The difference was even more marked for the other drugs. Physicians who received meals prescribed Bystolic at more than 5 times the rate of their uncompensated peers, Benicar at a rate 4.5 times higher, and Pristiq at a rate 3.4 times higher.


Higher rates of prescribing were also observed when doctors received just a single meal, even after taking into account a physician's specialty and region of practice.


Dr. R. Adams Dudley, a professor of medicine and health policy at UCSF and one of the study's authors, said he and his colleagues expected to see "some evidence that doctors were responsive to incentives, what with their being humans and all."


Still, he said, "I think we were probably surprised that it took so little of a signal and such a low value meal2026It has changed our thinking."


DeJong said the researchers don't think the meals themselves cause doctors to prescribe more of a drug, but rather the time they spend interacting with drug reps when they drop off those meals.


"There's really no way that a $10 bagel sandwich can influence a doctor in a gift way," she said. "We think it represents more reciprocity, the time spent with the drug rep and the fact that the doctor is listening to this 10-minute pitch."


Dudley suggested that patients talk to their doctors and ask "Is there a generic that's just as good?"


"Hopefully they can get the doctor off of the prescribing behaviors that we're observing."


Deputy data editor Olga Pierce contributed to this report.


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