In the light of frequently occurring crisis in banks, Reserve Bank of India needs to upgrade its oversight capacity to prevent them in future. Analyse (200 Words)
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
Vidya S 5 years
Kindly review it
IAS Parliament 5 years
Try to include about public manuals on supervising framework to increase transparency. Keep Writing.
IAS Parliament 5 years
KEY POINTS
Need for better oversight
· Regulators should be able to detect early warnings of such problems, not have to take drastic action only after they are told of them.
· The RBI must introspect on the fact that its auditors failed to detect the problem that has been festering for many years. Nor is this the first such time that the RBI has failed in its supervisory task.
· It did not detect an ongoing fraud at Punjab National Bank, for example, which misused the SWIFT inter-bank transfer system among other facilities.
· The regulator failed for years to either detect the fraud, respond adequately to red flags in the banking system, or correct a breakdown of normal practices at the bank.
· The IL&FS issue, which thrust the non-banking financial sector into a crisis from which it is yet to emerge, is another such recent oversight.
· There is no alternative to raising the RBI’s capabilities when it comes to banking oversight. In the last Union Budget, the RBI was given additional powers to regulate the NBFC sector and housing finance when it has barely demonstrated the capacity for the oversight of the sectors over which it had full powers.
For better oversight
· Central banks, such as the US Federal Reserve, have clear and public manuals on how it conducts banking supervision.
· The RBI should also expose its process to public scrutiny and discussion. When a final and acceptable process is arrived at, the RBI can structure its audit and enforcement capacity around that process.
· Similar rigour should be shown when it comes to drafting new regulations, which can currently be done by the central bank’s staff arbitrarily and non-transparently.
· Instead, new regulations which, after all, must be designed in tandem with the capacity to enforce them must be made after input from outside experts, in response to a clearly stated or foreseen need, and with the approval of the RBI’s board or a sub-committee thereof.
· The question of appeals to the RBI’s decisions should be re-opened. The quality of supervision by the securities regulator has been greatly improved by the presence of a relevant appellate tribunal.
Anu 5 years
Kindly review.Thank you.
IAS Parliament 5 years
Chinna 5 years
Kindly review...thank you
IAS Parliament 5 years
Try to include about public manuals on supervising framework to increase transparency. Keep Writing.
musabbir 5 years
IAS Parliament 5 years
Try to focus on criticisms on bonking oversight by RBI, unable to detect flaws in PNB crisis explain why in few points, include about public manuals on supervising framework to increase transparency. Keep Writing.
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