As a debate swirls around the appointment of a Deputy Governor (Banking) a more fundamental question popped up in my mind – How influential is a Deputy Governor in a system that has changed little since the British left India?
Many minions of Chidambaram such as K P Krishnan would love to become a Dy. Governor in the hope that they can one day succeed Urjit Patel to become the Governor.
For that matter, how independent is the office of the Governor of Reserve Bank? If one goes by its record of RBI not auditing the books of a specific Punjab National Bank branch for over nine years[1], then it is non-existent. This could not have happened without the “advice” of the Finance Ministry. For all the optics of getting a member of the Group of Thirty, Raghuram Rajan as the Governor accomplished little. In fact, his tenure is now under a cloud thanks to the dubious decision of approving the 80:20 Gold import rule during the fag end (May 14, 2014) of the UPA-2 rule[2]. Thus one can conclude that the Government needs to proceed with the utmost caution while selecting its next Deputy Governor (Commercial Banking).
Ability and experience should be the yardstick
The process of selection to the key positions in regulatory bodies has undergone some change based on the recommendations made by the Srikrishna Committee on Financial Sector Reforms, but this reform has failed to break the stranglehold that the bureaucracy has over the entire system, including the financial sector.
S. S. Mundra completed his three-year term on July 31, 2017. The date of completion of term was known well in advance, but till date, the post has not been filled. In fact, interviews were held on July 27, 2017, and candidates were shortlisted. But without giving any reason, the process was started all over again. Was there an “invisible hand” in play? Because of this void, RBI was without any Deputy Governor for last eight months to deal with banking supervision. Would a Dy. Governor have prevented the Nirav Modi – PNB scam? Probably not but we know who sat on the raid files for a year and ensured that Modi and Choksi escaped[3].
The Financial Sector Regulatory Appointments Search Committee (FSRASC) is headed by the Cabinet Secretary. For the post of Dy. Governor, other members of the Committee are Finance Secretary and three independent members. Like the independent directors on the Boards of the companies, the independence of these three independent members is suspect. In reality, it is the Cabinet Secretary who selects the candidate based on the recommendation of the Finance Secretary. Thus it is the bureaucracy which selects the candidates for key posts.
Is there a better way?
Once the bureaucracy makes up its mind, it will be another one of the babus that will end up being the choice. And that will be a disaster! Many minions of Chidambaram such as K P Krishnan would love to become a Dy. Governor in the hope that they can one day succeed Urjit Patel to become the Governor. That would be their way to pull wool over all the sins committed in the financial markets. It is reliably learnt that a certain group of individuals are working towards this exact outcome.
It is time for a distinguished finance person from the industry to take over as the Dy. Governor. Someone who has been part of a global company which has done business in every country in the world and understands Global Finance. There are several such individuals who will only be too happy to serve their motherland.
Will Modi do it?
Modi has often mentioned that while he may not know the inner workings of any system/ ministry, he does know how to pick the right person for the right job. Banking is too important a post to be left to the Babus. Mr. Modi, pick the right person and give him/ her a free hand and the banks will improve.
References:
[1] RBI skipped PNB branch audit for 9 years – Feb 28, 2018, Business Today
[2] 4 key things to know about 80:20 gold scheme – Mar 7, 2018, Financial Express
[3] Is Finance Secretary Hasmukh Adhia shielding PNB scamsters Nirav Modi & Mehul Choksi? Mar 21, 2018, PGurus.com
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Prof R Vaidyanathan possesses the requisite qualification, experience and aptitude for the position of RBI’s Dy Governor (Banking). He is a man of manifest competence and unimpeachable integrity. I wish and hope the Selection Panel headed by Cabinet Secretary opts for Prof R Vaidyanathan.
Looks like you want someone from Goldman Sachs. Say so clearly, why merely suggest in a roundabout way?
As for 80-20 scheme vis-a-vis gold import, Raghuram Rajan has clarified his position in an interview by Latha Venkatesh. The mud slinging against RR needs to stop now.
RR gave explanation…and we accept at face value..Is he Raja Harishchander..?
Goldman Sachs does not care about Raja Harish chandler.
So, why are you fighting shy of announcing name of person who ensured flight Choksi and Modi.
we know who sat on the raid files for a year and ensured that Modi and Choksi escaped[3].
Sir, You might be knowing but naive persons like me do not know and would like to know. I fully agree with you that the post should not be filled with by persons from bureaucracy but by persons with exemplary experience in finance from the industries. Hope the PM will act with due diligence.
>but we know who sat on the raid files for a year and ensured that Modi and Choksi escaped> – Well Sir,who was that crooked joker who allowed these crooks to escape?