Login With Google
RBI has wide-ranging powers : Government
Why in the news ?
- The Reserve Bank of India (RBI) has wide-ranging powers to regulate and supervise public sector banks, the government informed Parliament.
- The government’s statement counters RBI’s stance that the central bank lacks powers to regulate Public Sector Unit (PSU) banks, including dismissing banks boards and the management.
Background
- The central bank has been criticized by the government for its failure to detect the $2 billion PNB fraud perpetrated by jewellers Nirav Modi and Mehul Choksi.
- Responding to this criticism, RBI governor Urjit Patel had pointed out that the powers of the central bank were not ownership neutral and are curtailed with respect to state-run banks where a system of dual regulation by the government and RBI exists.
- RBI cannot remove directors and management at state-run banks, cannot supersede bank boards, does not have the power to force a merger or trigger liquidation of state-run banks, governor had said.
- RBI Governor later had pitched for more powers saying that the central bank had “inadequate” control over state-owned lenders.
- PSU banks, at present, are regulated by both the central bank and the government, the majority stakeholder in these banks.
Government's Stand
- Listing out RBI’s powers to deal with banks, government said the central bank can inspect the lenders, examine on oath any officer, direct special audit and give directions to banks.
- Government also said that the wholetime directors of nationalised banks and the SBI are appointed in consultation with the RBI.
- According to the government, RBI has a repository for all large credit exposures as well as a central fraud registry where banks report all frauds above Rs.1 lakh.
- It also has powers under the foreign exchange management act.
- The government also asked the RBI to examine the possibility of mergers among public sector banks to achieve synergy and scale operation.
Source
The Hindu, LiveMint.