Use existing powers, RBI, to seek more

  Use existing powers, RBI, to seek more

The RBI governor Urjit Patel has soght(दृष्टि/दिखाई पड़ना) more legislative(विधायी ) powers to effectively regulate state-owned banks. His plea to the Parliamentary Standing Committee on Finance to make banking regulatory powers ownership-neutral makes sense. The RBI should be able to exercise the same supervisory(पर्यवेक्षी/निरीक्षणात्मक) powers over state-owned banks as over private sector banks. The reform(सुधार) will enable the regulator to take legal action against any errant PSB, level the playing field between private and public sector banks and raise corporate governance. The RBI should also stop the practice of appointing its nominees on the boards of PSBs, given that there is a conflict(संघर्ष) of interest with its supervisory role. The regulator is in talks with the government on this issue, and that’s welcome. The RBI’s remit should be in charge of bank supervision, and not operations.

In its 2017 Financial Sector Assessment Programme (FSAP) of India (2017), the IMF had raised concerns over weaknesses in the independence of the RBI. The regulator, for example, does not have the powers to remove PSB directors or management, appointed by the government. It cannot force a merger(मिलावट/विलयन) or trigger a liquidation of PSBs, and also has limited legal authority to hold PSB boards accountable when it comes to strategic(महत्वपूर्ण) direction, risk profiles, assessment of management and compensation(मुआवजा) . It recommended a strategic plan for consolidation(एकत्रीकरण) , divestment(भंडाफोड़/अनावरण) and privatisation(निजीकरण) of state-owned banks.

The RBI must exercise the powers it already has, especially that of moral suasion. It also needs to improve skill sets of its supervisors and create domain specialists with legal, banking and audit backgrounds. Lateral entry into the RBI should be encouraged(प्रोत्साहित) to draw in the best talent for supervision. A revolving(घूमना /परिक्रामी) door policy can also work, if done right.

Important Vocabulary

1.Compensation(मुआवजा)
Synonyms: allowance, benefit, bonus, coverage, earnings, fee
Antonyms:debt, hurt, loss, penalty, damage

2.Reform(सुधार)
Synonyms: improve, rebuild, rehabilitate, remake, renovate
Antonyms: break, damage, destroy, harm, hurt

3.Divestment(भंडाफोड़/अनावरण)
Synonyms: noun deprivation, disinvestment, divestment, dispossession, privation, divesture

4.Merger(मिलावट/विलयन
Synonyms: combination, takeover, tie-up, unification, union

5.revolving(घूमना /परिक्रामी)
Synonyms: orbiting, spinning, swirling, whirling, circling
Antonyms: division, separation, parting

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