We suddenly have a premature exit of a great deputy governor who favoured competition among banks, was against banks selling third-party products and was pro-consumer
On 25th April, one of the most forthright and honest deputy governors (DG) of the RBI will retire—three months before his term ends. It is befitting that Dr KC Chakrabarty, who got the post and an extension without the customary lobbying, has chosen to quit before his term ends.
Unlike many colleagues and predecessors, he is not hanging on in the hope of another extension or a post-retirement sinecure. Dr Chakrabarty’s forthrightness has always disconcerted the denizens of Mint Street; but what made them really squirm is that he is usually right.
In August 2010, the then governor, Dr D Subbarao stripped Dr Chakrabarty of key portfolios following a deliberate set up. A vitriolic media report was used to drum up frenzy over his alleged comment that interest rates ought to have been hiked more aggressively to control inflation, claiming that it had rocked the bond market. Nobody has ever apologised to Dr Chakrabarty for the humiliation, although he has been proven spectacularly correct.
After holding off interest rates then, RBI was forced to hike interest rates so aggressively, that it caused a huge rift between the finance ministry and RBI governor Dr Subbarao, who had come to RBI as a blue-eyed boy of the government.
Although most of his portfolios were restored in a subsequent reshuffle, RBI has remained a faction-ridden and non-transparent organisation, which hampers its ability to frame policy transparently and quickly. Consequently, many decisions that would benefit ordinary people and depositors take forever.
Dr Chakrabarty often said that it took him several years to have some obvious pro-customer decisions implemented. One of these was to bar the pre-payment penalty that banks impose on home loan borrowers, to prevent them from switching to other borrowers. Since banks discriminated against existing borrowers by offering lower interest to new customers, the scrapping of foreclosure charges levelled the playing field for customers. He also stopped banks lending below their base rate and, more recently, from fooling customers with fake zero-interest loan offers during festivals.
Dr Chakrabarty has also been most vocal about mis-selling of third-party financial products by banks but was unable to stop it during his tenure. However, to Dr Chakrabarty goes the credit for ensuring one of the biggest ever payments by a foreign bank to actor-singer Suchitra Krishnamoorthi in a case of mis-selling. Despite resistance at various levels in the central bank, inaction by the insurance regulator and part-action by the capital market regulator, it is to his credit that Hong Kong & Shanghai Banking Corporation (HSBC) was forced to make a settlement.
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rbi has left verification and follow up of bills of entry of less than usd one lakh to bankers. but none of the banks have developed infrastructure for monitoring the same nor rbi is bothered. nor there is mechanism to follow up export advance received. whether export has taken place. all these matters have been brought to the notice of rbi. but no action.just like govt squandering borrowed money. rbi also is squandering borrwed forign exchange.
His penchent for playing to the gallery, self rightousness and rigidity to the extreme was never a virtue for a person at such a position.
Customer service within the law should be encouraged. The Banks should not sell third-party products (insurance) thus diverting from their regularly banking service more particularly credit management, now stands to lacks of crores of rupees as NPA, who is responsible? India needs genuine laws and policies and the organisations given the task to perform within their limits. Banks going in for insurance and selling other products is diverting attention, the employees given target will focus on this allied activity forgetting his main job/role.