ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bank Supervisory Arrangements

The purpose of this paper is to examine the choice of location of prudential supervision of banks. Should central banks assume this role or should there be a unified regulator covering all financial institutions? With the growing concern among central banks about the need to maintain financial stability, can such problems be effectively tackled if regulation/ supervision is vested with the central banks? The evidence.

Sir (Abraham) Jeremy Raisman, Finance Member, Government of India (1939-45)

Sir Jeremy Raisman wore several hats in one lifetime - a successful civil servant followed by an equally distinguished corporate career, yet his towering achievements as a statesman for India's cause during the war years of 1939-45 remain unsung. His contributions that dwarfed, by any criterion, those of his predecessors in office are, however, conspicuously ignored by Indian and British historians of the Raj. But it is for his intuitive understanding of India and its economic and political fundamentals, that Sir Jeremy will remain the ideal last Viceroy India never had.

In Small Doses

The Reserve Bank of India’s monetary policy announcement for the first half of this fiscal year is very much on the expected lines. There are no dramatic pronouncements on the macroeconomic front – the governor had earlier already ruled out any reduction in the Bank rate or the cash reserve ratio – no big bang reforms, no new announcements on the recent stock market/banking fraud. Nothing to unnerve the markets or unsettle the economy. Instead the policy carries forward the overall reform agenda – albeit in fits and starts – even as it tries to plug the loopholes in the system that have come to light in the context of the latest scam. However, market observers looking to find some admission of regulatory lapse on the part of the RBI are likely to be disappointed. Apart from a brief mention that the policy is being “presented at a time when serious lacunae have emerged in the functioning of certain segments of the financial system”, there is no elaboration of whether the central bank’s own supervisory lapses – of the clearing house or of urban cooperative banks/ commercial banks – contributed to the market operators’ shenanigans.

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