THE INSIDE VIEW
THIS COLLECTION OF CONVERSATIONS WITH GOVERNORS AT THE HELM OF RBI FROM 1992 TO THE PRESENT IS INFORMATIVE AND PERTINENT.
were interested in the functions and responsibilities of the Reserve Bank of India till the Prime Minister announced in his famous TV address on November 8, 2016, that `500 and `1,000 notes will not be legal tender with immediate effect. There was sudden interest in RBI’s responsibility of printing notes and ensuring that they reached the banks. Since then RBI has been attracting attention for various reasons: waiver of agricultural loans, writing off of non-performing assets by banks, running away of large defaulters of banks like Vijay Mallya, Nirav Modi and Mehul Choksi, and the conflict of interest in case of Chanda Kochhar of ICICI Bank. For anyone interested in the evolution of RBI’s policies on these and many other financial matters, this book will be highly informative and absorbing.
It is a collection of easy conversations with the governors of RBI since 1992 – C. Rangarajan, Bimal Jalan, Y.V. Reddy, D. Subbarao, Raghuram Rajan and Urjit Patel. The book covers the gamut of subjects that affect India’s financial landscape. A common reader may not be interested in all the topics covered in these conversations, but she will surely find some matters of interest.
One aspect that would make all the governors happy is India’s success in financial inclusion, which has recently been lauded by the World Bank in the Global Findex database. The number of account holders has increased from 35 per cent in 2011 to 80 per cent of adults in 2017; total deposits in Jan Dhan accounts alone are now `80,000 crore. However, there are statistics that paint a sobering picture – 19 crore Indians are still without a bank account and 48 per cent of bank accounts are inactive.
The interviews cover several aspects of banking that have evolved over the years. Reddy, for example, is categorical in saying that the Postal Department as a universal bank is totally undesirable. It is heartening that by the end of April 2018, post offices would start operating as payments banks providing banking services like savings account, payments and remittances.
About the role of banking in agriculture, as expected, Rajan is candid about agriculture credit when he says “in some cases, we don’t know where it ends up”. All the governors have supported priority sector lending.
They have uniformly spoken out against waiver of farm loans and yet, state after state could not think of any other mechanism of helping farmers! Patel talks of a critical look at Nabard’s role in agriculture and refinancing. One hopes that he would get a study of Nabard done as suggested by him so that the recurring problems of flow of credit to agriculture and financing for long-term assets in agriculture is examined objectively.
On digital financial inclusion, Patel is reassuring when he says that “first two objectives of RBI in this area are safety and security of customer”. With more and more people accepting digital modes of banking and payments, it is necessary that RBI is seen to be doing everything possible to ensure safety and security of digital transactions.
Even though some governors retired long ago, the book offers a glimpse of their perspectives on issues that are still relevant. For example, there is an interesting discussion on microfinance institutions and challenges in regulating them. The reader will enjoy the conversations as most of the issues discussed are germane to the Indian economic scene.
This book will be useful for policymakers, academics, students of economics and related disciplines and officers responsible for implementing government policies in the field. It is a valuable addition to the discourse on the Indian economy.
The reviewer is Former Secretary, Agriculture, and Visiting Senior Fellow, ICRIER