The Hindu Business Line : RBI under fire for outsourcing

The outsourcing of many of the Reserve Bank of India's functions came in for a sharp criticism at a seminar organised by the All-India Reserve Bank Employees Association here recently.

Professor Amiya Bagchi, economist, expressed the view that the India's central bank could not be the copy-book institution of the central banks of the US, UK and other developed countries. The Reserve Bank of India could not absolve itself of the role it played till recently to immensely benefit the economy and the people.

Explaining how over the past few years, the RBI had been abdicating its responsibilities one after another under the so-called new economic policy, he pointed out that the institutional credit to the agriculture sector was dwindling and incidence of farmers committing suicides was rising.

He particularly referred to the outsourcing of cheque clearing operations and cautioned that the private company entrusted with the job "could be another hunting ground for FIIs and speculators playing havoc with the country's bourses".

Professor Bagchi stressed the need for holding countrywide debates on the dangers posed by the outsourcing of the RBI jobs.

Caution on rupee float

Professor Ratan Khasnobis of the Calcutta University was of the opinion that the interest rate in India would, henceforth, largely follow the international rate of interest and the role of the RBI in determining the lending rate to ensure adequate liquidity to meet the credit growth and maintain price stability would gradually become part of history.

He particularly referred to the recent increase in repo rate. The management of foreign exchange would soon cease to be a major function of the RBI and, with full capital account convertibility, which was high on the government's agenda, Indian money market would be thrown open to the operators in international money market.

India might turn out to be a favourite ground for illegal money laundering and the privatisation of clearing houses would only increase shady deals through the international negotiable instruments, more so because the FII investments through the Mauritius route was being favoured by the policy makers, he added.

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