‘RBI must be held accountable for being unable to grasp the seriousness of the loan repayment problems’

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Mumbai/new Delhi | Published: November 29, 2018 6:09:15 AM

Former chief economic adviser (CEA) Arvind Subramanian has said the Reserve Bank of India (RBI) must be held accountable for being unable to grasp the seriousness of the loan repayment problems or identify the prolonged frauds of Nirav Modi.

RBI must be held accountable for being unable to grasp the seriousness of the loan repayment problems

Former chief economic adviser (CEA) Arvind Subramanian has said the Reserve Bank of India (RBI) must be held accountable for being unable to grasp the seriousness of the loan repayment problems or identify the prolonged frauds of Nirav Modi. “With the recent shenanigans involving IL&FS being revealed, this failure seems to have encompassed not just commercial banks but also non-bank financial companies. For these failures, the RBI needs to be held accountable,” Subramanian has written in his latest book Of Counsel. He said RBI must credibly step up its supervisory abilities, or even be willing to hand this over to a new agency explicitly created for this purpose.

The former CEA believes a radical solution is called for to solve the twin balance sheet problem by privatising public sector banks via an amendment of the Bank Nationalisation Act. Subramanian said the executive has, over decades, has ceded ground on decision making to the one organ that still retains strong public legitimacy, namely, the higher courts, especially the Supreme Court. Slowly, steadily and not costlessly, the judiciary has acquired a greater role in economic policymaking, he has written.

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“In particular, it has shifted the balance of institutional power and authority away from the executive and legislature. Indeed, it seems at times that the only legitimate locus of decision making, even on major economic policies, is the Supreme Court. This situation is certainly better than a state of indecision. But it is not without costs.”

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