Former RBI Governor Says Almost Resigned On Differences With P Chidambaram

New Delhi:¬†Former Reserve Bank of India Governor Y V Reddy has written in his autobiography that he once contemplated resignation and had to even offer an unconditional apology to then Finance Minister P Chidambaram. In ‘Advice and Dissent: My Life in Public Service’, being released on Tuesday, Mr Reddy describes his differences of opinion as RBI governor with Mr Chidambaram. These led him to also think of putting in his papers. The issue concerned opening the banking system to foreign ownership, which came to a head with Mr Chidambaram in 2008.

Mr Reddy was governor of the central bank between September 2003 and September 2008.

Mr Reddy narrated an incident of a meeting where Mr Chidambaram told him: “Governor, this is a national commitment made to global financial community. How do we justify reversal of such a policy? Is it just because there is a change in the incumbency of the government? Do we review our commitments every time a governor or the RBI changes?”

Mr Reddy, according to the book, told him that “it has serious irreversible consequences. I believe it is better to go back on our commitment at this stage, in national interest.”

“But I believe that it is in our national interest,” Mr Chidambaram was quoted as telling the RBI governor.

Mr Reddy has written that he confided his troubles to then Economic Affairs Secretary Rakesh Mohan.

“‘Rakesh,’ I told him, ‘it is better I leave this job. I believe that the issue is very critical to our national interest. I think opening up of foreign banks should not be done at this stage at all. Still, if the government feels that this has to be done, it has to be done. But I will not be able to put my heart in it’,” Mr Reddy wrote.

“So, better I quietly leave the job,” Mr Reddy added.

Y V Reddy was governor of the RBI between September 2003 and September 2008


He also wrote that despite Mr Chidambaram’s unwillingness to relieve him as governor, “I felt that there was a growing distance between us as months passed by. His (Chidambaram) image as a reformer pushing for double-digit growth was, in his view, being dented by my caution to the extent of resisting implementation of some of his policies.”

“At one stage, he said that he was cancelling his foreign tour because he could not face them with nothing to report on reform. His frustration was confirmed later, I think in early 2008,” Mr Reddy wrote. When he met the minister, Mr Chidambaram said the RBI was not adequately reciprocating by progressing with reforms. “I expressed my unconditional apology to him and conveyed that I would keep in mind the issue of being supportive,” Mr Reddy said, describing how the matter ended.

However, on the overall experience of working as RBI Governor “closely” with Mr Chidambaram for over four years, Mr Reddy wrote: “Most of our tensions could be described as constructive or as discord that ultimately gave rise to better ideas or outcomes.”

Another contentious issue was that of farm-loan waivers, that continues to be controversial.

“I opposed the proposal made in February 2008 to write off loans to farmers amounting to Rs. 60,000 crore. I argued my case before the Finance Minister, and at one stage before the Prime Minister accompanied by the Finance Minister. Economic logic including preservation of credit culture was in favour of RBI’s position,” Mr Reddy says.

However, “I could see the government was acting out of broader concern for the welfare of farmers. I suggested that the government should pay the money to the banks on behalf of the farmers.”

Thus, a different aspect of the situation dawned on Mr Reddy.

“I believe that as governor, I could advance arguments from the point of view of money and credit, but I had no legitimacy to question the judgement of the government on social order,” he said.

In fact, the autobiography sets out Mr Reddy’s unique perspective as a central banker on the relationship between government and the RBI .

“It is hard to find the government’s version of dealing with the central banks. Since I worked in the government also, and dealt with the RBI, a part of the story relates to this,” he wrote in the introduction.

Mr Reddy, who famously described the RBI as “totally free, within the limits set by the government”, has served as the Union Finance Secretary and was the Chairman of the latest 14th Finance Commission in 2013-14.

Farm loan waivers have only added to the gigantic non-performing assets (NPAs), or bad loans, of banks. Mr Reddy has emphasised elsewhere that there is no “political economy consensus” on tackling the mounting problem of bad loans of banks, which cannot be resolved by their simple recapitalisation.

Scamsters’ Trading Tips Via SMSes: SEBI Seeks RBI, TRAI Help

New Delhi: Seeking to capitalise on the stock market rally, fraudsters are flooding gullible investors with unsolicited offers promising huge gains, prompting regulator Sebi to consider a closer coordination with banking and telecom regulators to check this menace.

These offers are mostly being made through SMSes, WhatsApp and various social media platforms, wherein names of some established brokerage houses and exchanges are also being misused.

While the Securities and Exchange Board of India (Sebi) has already taken action in several such cases so far, it is investigating a number of others involving similar activities, a senior official said.

To check the menace, the regulator is also looking at a closer coordination with its peers from the banking and telecom sectors — namely the Reserve Bank of India (RBI) and the Telecom Regulatory Authority of India (TRAI), they added.

Typically, Sebi depends on the call data records from the telecom companies and the financial transaction statements from the banks in its probe against such cases of frauds, where investors are lured into depositing money into designated bank accounts with promise of huge returns.

Generally, the gullible investors are first lured by these scamsters through SMSes, WhatsApp messages and posts on social media platforms like Facebook and Twitter, after which they are given certain bank account numbers to deposit money.

The mobile numbers and URLs, as also the bank account numbers, become the mainstay for the investigation by Sebi, ownership details of which help the regulator reach the perpetrators of such manipulative activities.

SEBI has already taken action against firms providing investment advice without registration.

Sebi has already taken action against several entities for providing investment advice without registration. These included MCX Biz Solutions, Moneyworld Research and Advisory, Global Mount Money Research and Advisory, Orange Rich Financials, GoCapital, CapitalVia Global Research and one Imtiyaz Hanif Khanda and his maternal uncle Vali Mamad Habib Ghaniwala.

Besides tightening its noose on the scamsters, Sebi enhanced its investor awareness campaign on these issues.

In several latest public notices, the capital markets regulator cautioned the investors against trading on the basis of unsolicited tips received through SMSes, social media, websites and other public media platforms.

It also asked the public to deal with only Sebi-registered investment advisers and research analysts and warned the unregistered entities of strict action.

Last year, Sebi had floated a consultation paper to ban unauthorised trading tips through SMSes, WhatsApp, Twitter, Facebook and other social media platforms, as also games, competitions and leagues relating to securities market.

It also proposed to curb unsolicited investment advice and promotion of investment products through electronic and broadcasting media platforms and has sought greater checks and balances for online investment advisory services and use of automation or robotic tools.

However, the regulator has yet to put in place a final regulation in this regard.


RBI Expands Oversight Committee; Inducts Three-Member On Panel

Mumbai: The Reserve Bank has expanded the oversight committee by appointing three more members to the high-level panel that will vet the process to resolve mounting bad loans bogging down the banking sector.

Former chief vigilance commissioner Pradeep Kumar will head the now 5-member panel that will work through multiple benches, RBI said in a statement.

The expansion follows promulgation of the Banking Regulation (Amendment) Ordinance, 2017 last month. The ordinance had outlined the reconstitution of the Overseeing Committee (OC) with an expanded mandate.

RBI is concerned over the growing bad loans which has soared above Rs 8 lakh crore.

“The Reserve Bank has since brought the OC under its aegis. The OC will, for the present, have five members, including a chairman, and will work through multiple benches as may be necessary and constituted by the Chairman to opine on the cases referred to it by the banks,” it said.

The reconstituted OC will work with an expanded mandate to review, in addition to cases being restructured under the Scheme for Sustainable Structuring of Stressed Assets (S4A), resolution of other cases where the aggregate exposure of the banking sector to the borrowing entity is greater than Rs. 500 crore, it said.

“The circular advising the banks of the above changes and other details of the process to be followed by banks for resolution of identified stressed assets within six months will be issued separately,” it said.

Besides Kumar, the other members of the committee are former SBI Chairman Janki Ballabh, former Canara Bank Chairman and Managing Director M B N Rao, former Chairman and Managing of L&T Finance Y M Deosthalee and S Raman, member Sebi.

Raman would be inducted into the panel from September 7, 2017 after he completes the term at Sebi.

On May 22, RBI had said it will reconstitute the OC under its aegis to operationalise the banking ordinance for resolving the issue of bad loans that have soared to over Rs. 8 lakh crore.

The ordinance authorises RBI to issue directions to banks to initiate insolvency resolution process in respect of a default under the provisions of the IBC.

Provide Adequate Transaction Details In Passbooks: RBI To Banks

Mumbai: The RBI today asked banks to provide “adequate details” of transactions in the passbooks and statements of accounts so that customers can cross-check them.

Earlier, the Reserve Bank had advised them to avoid inscrutable entries in passbooks/statements of account and ensure that brief, intelligible particulars are invariably entered with a view to avoiding inconvenience to depositors.

However, the RBI said it has come to its notice that many lenders still do not provide adequate details.

Earlier, RBI had advised banks to avoid inscrutable entries in passbooks.

“In the interest of better customer service, it has been decided that banks shall at a minimum provide the relevant details in respect of entries in the accounts,” the central bank said while prescribing a list of details to be provided.

The details to be provided by banks in passbooks, include name of the payee, mode of transaction, nature of the charges (like fee/ commission/ fine/ penalty), and loan account number.