(LiveMint)
The Reserve Bank of India (RBI) has wide-ranging powers to regulate and supervise public sector banks, the government informed Parliament on Tuesday. The government’s statement counters RBI’s stance that the central bank lacks powers to regulate PSU banks, including dismissing banks boards and the management.
The statement could be an indication that the government is unlikely to take any steps to address the problem of dual regulation flagged by RBI. PSU banks, at present, are regulated by both the central bank and the government, the majority stakeholder in these banks.
Responding to a query in the Rajya Sabha on Tuesday, the government said “powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks”. RBI has powers to inspect the bank and its book of accounts, has a nominee member on the board of state-run banks and is part of a committee within the board that approves large loans. RBI can appoint additional directors on the banks’ boards. Besides, the whole-time directors are appointed in consultation with RBI, the government said.
According to the government, RBI has a repository for all large credit exposures as well as a central fraud registry where banks report all frauds above ₹ 1 lakh. It also has powers under the foreign exchange management act.
