Opaque RBI rewards charge-sheeted official

RBI director, who once scrambled to pay Rs20 lakhs to a hoax caller, was rewarded with promotion to oversee NBFCs!

Putting a lid on officers' scandals is not new to the Reserve Bank of India (RBI). Last week, Moneylife reported that the blemished track record of Anand Sinha, the deputy govenor designate had been informed to the cabinet secretary and finance minister by an activist.
 
(http://www.moneylife.in/article/72/11085.html) We now discover that a dangerous lack of judgement on an even major issue of indiscretion has been similarly buried. In fact, the case almost reads like a piece of fiction.

On 18 December 2003, the regional director of the RBI posted at Bhopal received a call from someone who claimed to be the then RBI governor, YV Reddy. (Some say he claimed to be a relative in Bhopal, but that will only make the RBI official's actions worse.) The caller told the regional director (RD) that he urgently needed her to arrange Rs20 lakhs for some payments to be made. The money had to be in cash.

The RD immediately called up some of her deputies and rushed around trying to raise cash for the "governor's emergency needs". But Rs 20 lakhs was difficult to raise in a jiffy, even for an officer charged with supervising all banks in the Bhopal region. So she sprang into action and got her junior officers at the RBI and others to withdraw cash, added some of her own money and rustled up Rs9 lakh. The "governor" or his agent was willing to accept the smaller amount raised and asked for the money to be delivered under a bridge in Bhopal. The regional director hopped into an autorickshaw to personally deliver the money. Even later, she did not check back with the governor's office to ask if he had legitimately sought the money. She probably hoped to be quietly rewarded.

In January, the Bhopal police caught the imposter in another case and only then did the pay-off arranged by the RD come to light. The matter was reported to the head office, which immediately sent a team from the vigilance department to conduct an inquiry. A preliminary inquiry found that "the regional director acted in a most unusual manner, and not only did she fail to exercise her judgment, but her conduct was suspicious and required further investigation. It also held that she coerced a number of officers working under her to collect money". She was transferred out of Bhopal and not given any assignment.

When this episode came to the attention of Dr YV Reddy, he was beside himself with anger. The officer and her juniors were charge-sheeted. A former deputy governor correctly wanted her sacked. After all, how can anyone in such a responsible position be so stupid? Wouldn't she at least check if the call had indeed come from the governor? On the flip side, it would suggest that the officer believed that an RBI governor is capable of asking a regional director to gather Rs20 lakh in cash at short notice and have it delivered to strangers under a bridge! That the senior officer acted on it is a strange reflection of what really goes on inside the RBI. It also suggests that someone at the level of a regional director, did not for a moment think that raising private cash cannot be part of her duties and refused to comply.

Subsequently, a departmental inquiry found her guilty of gross misconduct and negligence and she was demoted from the rank of CGM to GM. Her juniors who blindly followed her orders received similar slaps. But the RBI decided not to sack her. Instead, she was posted as vice principal, Bankers Training College, where she remained from June 2004 until the end of 2006.

But at the RBI, even such gross blunders do not end your career if you have godmothers at senior levels. Once the dust over her Bhopal shenanigans had settled down, she was promoted again in 2007 as chief general manager and given a crucially important post in the Department of Banking Supervision. Since 2010, she is chief general manager in charge the Department of Non-Banking Financial Supervision-an extremely important post at the RBI. Her name is Usha Subramaniam. That the central bank can bury a problem as serious as this is yet another reason why we demand that there needs to be more sunshine on RBI's many departments that have nothing to do with deciding the country's monetary policy.

In effect, even an official with no common sense and convenient moral flexibility can easily get away after such a sordid episode. In this case, our sources say that Ms Subramaniam's career was revived by none other than deputy governor Ms Shyamala Gopinath. RBI governor Dr D Subba Rao has currently charged Ms Gopinath with handling as many as 21 departments. Clearly, the RBI governor needs to dig into the RBI files.

We queried the governor whether this episode and the subsequent elevation of a charge-sheeted senior official meets with his approval. He did not reply. Meanwhile, this is yet another issue that Deepak Mehra from the Forum for Financial Fairness in Mumbai is set to take up with the finance ministry.
 

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COMMENTS

k gopalakrishnan

8 years ago

It is surprising that the author digs up the case after so many years. Has she got paid for this job through the distractors of RBI? As an ex collegue from RBI, I know her well. Though at times abrasive, her honesty and integrity is beyond any doubt and especially she is far superior to the author both with regard to intelligence and knowledge of the subject. The author was apparently peeved when she was not taken seriously by Mr. Anand Sinha at the time of Harshad Mehta scam and she wanted him to repay for this and hence her fumings. But what about Ms. Uma. Any one in the know of things as to why the author is peeved at her?( I wish I had seen this news item earlier)

REPLY

amod ansari

In Reply to k gopalakrishnan 8 years ago

what is this personal and personalised garbage you are posting. check what is happening in the country -- telecom scam, citibank scam, realty scams, adarsh scam .... you manage a worms eye view of things by reducing everything to personal issues. And you link it back to a couple of decades of spite. Wow... no wonder India is heading to become a banana republic .. where you simply cannot ask for competence.

Arif Allana

8 years ago

Such cases need to be highlighted in Nationa Newspapers and Channels . If it had been in pvt sector the person concerned would have been immediately sacked

nitpam

8 years ago

Sucheta Madam,it is a request that you should write against those DNBS officials who invested in Limosine and got cheated and there was a news item how these officials could protect the common investors if they get cheated,their efficiency is also questionable and some of these officials have also been promoted and some are on the verge of being protected.Please pose question to Governor of RBI on the said issue,if Uma Subramanins continuing in RBI is questionable then what about those DNBS officers who themselves were the victims of being cheated by limosine?

Kanta

8 years ago

I agree with the views of Nitpam who correctly pointed that she is against the corruption. Why the incidence which took place years back appeared now? It shows that there are some employees involved whose bills etc. are questioned by the madam. I opine that one should investigate further. As far as she is concerned, she is very honest and she never spares the one who does wrong deeds. I am sure that those who are corrupt will never support her.

nitpam

8 years ago

What about those efficient non corrupt officials who progressed in her regime,I think her being harsh on officials who have misused their position in getting their children recruited in foreign banksand private institutions and her compelling the officials to perform their duties, she is definately against those work sheirkers taking fat salary and perks,without performing. She compels officials to deliver the goods,not like many top officials who themselves are corrupt or inefficient and turn a nelsons eye to what other do.There may be few disgruntled elements but she has suitably rewarded them who have discharged their duty and done justice to the salary that they receive.If a probe is conducted by CBI it will be proved that officials have misused their position to get theirr children recruited in Banks and financial institutions I am sure corrupt will never support her.

S Verghese

8 years ago

This was a news item in the Bhopal papers at one time. Nothing happened to Uma, except for the period of inactivity which she gainfully used to upgrade her qualifications on a full pay! Why did this come up only now in your column? The lady has ruined many a career of subordinates in her departments. She took off all her grief by spoiling the reports of promising officers. She came back to power in full force & with a vengence, never felt remorse at the agressive & rude mannerisms while dealing with faculty members at Bankers Training College & inspecting officers in her DBS days.

nitpam

8 years ago

Yes it is true that the incident has occured but not the amount what you have quoted.The other side of the lady should be seen,she is one of the rarest asset to the bank,as DBS chief she has sent chills in spine of the banks under her jurisdiction.She is doing the same with NBFC's at present.You should look into the other side also her honesty,sincerety and expertise banking knowledge.Being a spinster,she has no kith kin like many of top executives to be posted as executives in private sector bank or NBFC's.Her honesty sends shiver to the disgruntled officers who have been resorting to practises of claiming bogus bills or claiming bills not entitled as per rules.She terrifies the corrupt if the ugly incident which has taken is set aside she definately needs to hold the chair which is disputed by you>I canassure you if you investigate the other side of her qualites,you may canvass for her elevation to higherpost.Please make a investigation and one error cannot negatethe other side of qualites.All the Best.

Pantulu

8 years ago

I am really surprised how such things can happen in Reserve Bank. I worked in Public sector also and can confidently say that rules are to be followed even if the requirement is urgent. Have the rules changed as in the case of 2G spectrum? Most of our scams can be traced to not following rules. Is this the effect of so-called liberalisation?

R Balakrishnan

8 years ago

If Manmohan Singh can become a PM, a Rangarajan can become a governor or head the planning commission, at least these are resourceful persons and do not pretend to be intellectually honest. And it is time someone bought a big lock and shut down the RBI. Their battle against inflation is getting to be a joke. And after YV Reddy, the RBI is merely an extension of North Block. So, why waste resources on a RBI if north block is taking 'care' of us?

ramakrishna

8 years ago

This era is like "Yadha Raaja Thadha

Praja" "yadha praja thadha Raja"the qulities rulers have similarly officers,the qulities people have similarly rulers.ultimately people are sufferers

Santhana

8 years ago

Chief General Manager at RBI being so stupid!! Can't imagine. May be the more stupid you are the higher you go!! How they got in at the first place into RBI. Sure she would not have got thro ST/SC quota, only thro God fathers like Ms.Gopinath

REPLY

psb

In Reply to Santhana 8 years ago

It's a simple common sense, the person in question belongs to upper class Tamil Nadu Brahmin community and the person who reviewed her file also belongs to the same community, where is the question of worrying about SC/ST!!!!. The merits do not matter here.

Samar

8 years ago

RBI was given a chance to reply, but I wonder why they kept mum. What do they have to hide?

Why is the Finance Minister unhappy with the heads of SEBI and RBI?

Probably for the first time in decades, the finance ministry is not quite in sync with two of the important regulators–the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). Some argue that this is a consequence of the Financial Stability Development Council (FSDC) Bill, which clipped the powers of all the independent regulators and gave the finance ministry the power to settle squabbles between the regulators. At the time, RBI governor D Subbarao went public with his opposition to the government’s move, but was duly ignored. Funnily enough, that squabble—that gave FSDC a statutory life—was between SEBI and the Insurance Regulatory Development Authority (IRDA), with the RBI governor as head of the High Level Coordination Committee (HLCC) of regulators failing to prevent them “quarreling like petulant children”.

Others say that the finance ministry’s unhappiness with the RBI has nothing to do with the token protest against the FSDC. There are many other issues that are causing embarrassment. For instance, the RBI’s tendency to ignore rules with regard to senior appointments—take the manner in which deputy governor K C Chakrabarty was appointed; or the case where the search committee wasn’t given the entire background regarding Anand Sinha, who was chosen as deputy governor to replace Ms Usha Thorat, who retired last week.
According to sources, the promotion mechanism of the RBI is so robust that even for less senior appointments each interviewee’s files (containing even embarrassing delays in clearing tour bills and so on) are placed before the interview committee. If this is so, then did the search committee which chose Mr Sinha ignore his less-than-glorious track record and the fact that he had only four months of service remaining? Or were the facts kept out of his file? Either way, many RBI officials believe that it warrants an inquiry.
The goings-on at the RBI in recent months have led to a lot of angry rumblings. Its officials are asking questions through letters to Moneylife (sometimes anonymously). One of these writers points out that in the vacuum created by Ms Thorat’s retirement, Ms Shyamala Gopinath, a deputy governor who is already on a lucky extension, has been given 20 important portfolios to handle. The RBI said this was a temporary measure until a new deputy governor is appointed, but the writer says that Ms Gopinath who is hardly known for quick decisions or clearing files in time, could not have been expected to handle so many departments without it seriously slowing down decision-making at the highest level of India’s central bank, monetary authority and banking regulator.
Meanwhile, K C Chakrabarty, who is known to be brash but efficient, is not being given any work. According to a source, “Isn’t there a cost to the country in terms of money and blocked decisions, in punishing a deputy governor by not giving him any work? Shouldn’t the governor be made accountable for this state of affairs? If he really thinks that Dr Chakrabarty is not fit or capable to handle more than the customer services portfolio then the RBI should take steps to remove him from his job, otherwise he must be given back his portfolios immediately.”
Interestingly, it is the finance minster who should be questioning the RBI’s decision. But with the government rocked by one corruption scandal after another and the ministry already under pressure over the FSDC, both the RBI governor and the SEBI chairman are able to ignore North Block.
As far as SEBI is concerned, our sources say that the finance minister is upset about a series of actions and decisions by the regulator and it has received endless complaints from corporate India about its arbitrary and high-handed functioning.
 
However, since the SEBI chairman has just over three months left in his job, the government is willing to bide its time. The only time it put its foot down was over SEBI’s hasty move to overhaul the takeover code by accepting the C Achuthan Committee report. In that case, some SEBI directors, armed with instructions from North Block, were said to have asked that a decision on the Takeover Code Committee’s report be deferred.
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COMMENTS

nagesh kini

8 years ago

Our netas incl. the FM are shouting from the roof top about "eradicating corruption". Nothing is happening.
The ugly monster keeps only going on and on and increasing in volumes adding more zeros as it goes along. When will it ever stop? We've even got a tainted CVC who claims he doesn't have any corruption charges but only 'criminal conspiracy' (!).It's a limit.

sanjeev lihala

8 years ago

Re : KYC for investment in mutual fund.

Sir,

Downloading copy of verified kyc is very simple and just attaching the same invest is allowed I think this is wrong practice and malafide.

manoj

8 years ago

The present FM has broken all records of incompetency-he is not at all fit to be FM of this country-he is expert in only increasing taxes,looting people and then giving this money to corrupt politicians like kalmadi and A raja.
FM has no right to stay at this post-he is useless fellow who needs a place in DUSTBIN.

saraf

8 years ago

finance minister earlier said that regulators are doing good and government will not interfere, then where is the question of FM unhappy.....mind it is is finance / capital market one wrong decision by any one regulator will effect future of crores....I think because of ignorance by FM and its controller , regulators like sebi r doing whatever possible to kill the small investors.
Ms.dalal please cover / investigate research reports by BSE aid

REPLY

rakesh

In Reply to saraf 8 years ago

Please dont go by what the FM says. He is a clever and experienced man, watching everything.

bhaskar

In Reply to rakesh 8 years ago

no,rakesh sir,i agree with manoj sir that this fm really needs a place in dustbin.he is incompetent enough.what for is watching when he is not able to do or even say anything good?????he is in english bullshit and in hindi "billi ka......"

Prateek Basu

8 years ago

Not satisfied with harassing the MF Distributor community and investors alike,Mr Bhave's latest initiative that w.e.f.01 January 2011,all MF investors will have to become KYC Compliant is like the proverbial last nail in the coffin!!Apart from it being impractical due to obvious reasons,this will surely drive out remaining investors from mutual funds.
I hope the Finance Minister takes note of this too because this SEBI chairman has sounded the death knell of mutual funds slowly but surely,ever since he took over.

Nagesh Kini

8 years ago

The so-called financial regulators are dabbling in policy instead of regulatory functions.They've been squabbling like spoilt brats making personal issues. The ULIP which has more "Investment" and less of "Insurance". It is Harinarayan v. Bhave WWF one-on-one!
On cashlessmediclaim the FM in a written statement to a parliament question says that Cashless is not withdrawn, Health Minister says "It is not done" and yet IRDA Chairman persists with the withdrawal of cashless by maintaining that it is spat between the insurers and service providers putting into jeopordy millions of policy holders. The North Block ought to wind them all !

SBI Chairman cocks a snook

Meanwhile, the RBI is facing much embarrassment over the State Bank of India’s (SBI) teaser rates on home loans. Teaser rates worry bankers because they hark back to all that was wrong and led to the financial crisis in the US. They lure people to avail of loans at a discounted 8% and expose them to hardship when rates rise after the discount period ends.

But with SBI—the biggest lender—offering teaser rates, other banks and mortgage financiers have no option but to follow, in order to remain in business. Even business leaders such as HDFC Chairman Deepak Parekh have publicly expressed their unhappiness over teaser rates. But the SBI chairman is unfazed.

Bankers were particularly astonished by SBI chairman OP Bhatt’s vociferous defence of teaser rates at the recent credit policy meeting, when the RBI increased the provisioning for real estate loans and expressed concern over teaser loans. We learn that Mr Bhatt repeatedly pointed out that Ms Shyamala Gopinath, who is on the SBI board of directors was a party to its decision to continue with teaser rates. Embarrassed, Ms Gopinath tried to prevaricate, but Mr Bhatt insisted that she had definitely attended the meeting at which it was decided to extender teaser loans. Mr Bhatt’s “boldness” has caused a huge ripple among bankers, because this is the first time that a banker has been openly defiant on RBI policy. Normally, bankers are supposed to understand hints and nuanced under-statements and are expected to make haste and comply. Mr Bhatt has sent a signal that he is not in a hurry to fall in line. It is a situation that other bankers are watching with shock and awe.

Interestingly, the RBI has been helplessly expressing apprehension over teaser loans since February 2010. At a Banking Conclave (Bancon) in January, former deputy governor Usha Thorat had said, “In the area of housing loans, teaser rates are increasingly being offered, which is a cause for concern. I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal takes into account the repaying capacity of the borrowers when the rates become normal.”

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