Special Correspondent

`RBI has virtually abandoned the direct supervision of the banks' operations'

  • The duty of supervising the bank branches is now being handed over to chartered accountants
  • The RBI authorities are now trying to hand over its cheque clearance function to private companies

    THIRUVANANTHAPURAM: Convener of the United Forum of Reserve Bank Officers and Employees Samir Ghosh has said that the new practice of the Reserve Bank of India (RBI) to outsource its responsibilities and activities will weaken the foundation of the banking system.

    Addressing a seminar organised by the forum here on Tuesday, Mr. Samir Ghosh said the RBI had virtually abandoned direct supervision of the operations of commercial banks in the country. Scams were being reported from banks and banking financial companies.

    The duty of supervising the bank branches was now being handed over to chartered accountant firms, he said.

    The RBI authorities were now trying to hand over its cheque clearance function to private companies. The Union Government had even introduced a Bill in Parliament for this, inviting strong protest from the bank employees' unions, he noted.

    He said the RBI had also decided to give up the job of managing the public debt of the State and Central Governments. This would put the States, especially the weaker ones, to great difficulty when they sell their bonds, as they would be called upon to offer higher interest rates. The finances of the weaker States would slip from bad to worse as a result, he said.

    He said that the currency system in the country was a shambles. He alleged that cent per cent checking of soiled currency notes was not being done by the RBI before destroying them. Forged currency notes had entered the market in a large scale. The situation was particularly bad in the North-Eastern States, he said.

    "When the policy makers gloat over growth in the country's Gross Domestic Product, thousands of our debt-ridden farmers are committing suicide as, unable to sell their produce, they could not repay loans taken from greedy private money lenders... . This is happening at a time when our banking system has a deposit base of nearly Rs.2.3 million crore," he said.