Two years on, RBI’s specialised supervisory cadre yet to take off

The decision to set up an SSRC in 2019 came after a series of events including the IL&FS defaults, ICICI Bank loan issue, Punjab National Bank fraud, DHFL fraud in 2019 and liquidity issues in the NBFC sector.



Get email alerts for your favourite author. Sign up here

Two years after the Reserve Bank of India’s Central Board cleared the creation of a specialised supervisory and regulatory cadre (SSRC) for effective monitoring of the banking and financial entities, the proposal is yet to take off despite assurances given to the Parliamentary Standing Committee on Finance.

The decision to set up an SSRC in 2019 came after a series of events including the IL&FS defaults, ICICI Bank loan issue, Punjab National Bank fraud, DHFL fraud in 2019 and liquidity issues in the NBFC sector. The Yes Bank and PMC Bank fiasco surfaced later amid complaints that the RBI was lax in the supervisory functions.

The scheme evoked lukewarm response from the RBI staff with only a small number opting. The RBI Officers Association had opposed the proposal, saying the proposed cadre did not find takers because it was prepared without detailed study, lacked clarity, vision and experience in administration. The proposal for the cadre appears to be in the backburner, with not much progress on its formation, said a banking source.

The RBI did not respond to a mail sent by The Indian Express on the status of the new cadre.

Officers in the cadre would lack the exposure in other areas, and, therefore, there is an urgent need to review the decision related to SSRC, RBI unions had complained to the Governor. Another complaint of supervisory staff is that, traditionally, the supervisory vertical is always headed by a Deputy Governor coming from a public sector bank, leading to a conflict of interest. While the Standing Committee on Finance had questioned the RBI for failing to take pre-emptive action in checking bad loans prior to the Asset Quality Review undertaken in December 2015, official sources said the RBI acted quickly when the issue cropped up and put 12 banks under the Prompt Corrective Action.

When Urjit Patel was the Governor, the central bank had said in a letter to the Parliamentary panel that its supervisory process does not constitute an audit of banks. With the number of commercial bank branches being more over 1,16,000, it would be impossible to cover each and every branch under the RBI’s supervisory process, it had said. The RBI currently has a Board for Financial Supervision, with four directors from the Central Board as members and chaired by the Governor. Deputy Governors of the RBI are ex-officio members.

Source: Read Full Article