Against expectations, there was a RBI Board meeting on demonetisation evening. However, the number of members present were 8, even lesser than the 10 appointed members.The 10 appointed members at the first place are even lesser than the required 21 as per RBI Act. This blog was quite early to point to this governance issue and now others are waking up to it as well.
The Reserve Bank of India Act, 1934, empowers the Union government to demonetise any series of banknotes. The government, however, cannot take this decision on its own, but only on the recommendation of the RBI’s central board.
In response to a right to information request, which Hindustan Times has sought, the RBI said the bank’s central board of directors made the recommendation at its meeting in New Delhi on November 8. Only eight of the 10 board members attended the crucial meet.
Apart from RBI chief Urjit Patel and economic affairs secretary Das, the meeting had RBI deputy governors R Gandhi and SS Mundra, Nachiket M Mor, the country director for the Bill and Melinda Gates Foundation, Bharat Narotam Doshi, former chairman of Mahindra and Mahindra Financial Services Limited, former Gujarat chief secretary Sudhir Mankad, and financial services secretary Anjuly Chib Duggal.
The law provides for a 21-member board, including 14 independent members, but the central bank has been operating with less than half.
This is how the table looks:
|RBI Act||Positions||RBI Act Prescription||Appointed||Present on 8th Nov|
|Section 8 a||Governor||1||1||1|
|Section 8 a||DGs||4||3||2|
|Section 8 b||Local Board Heads||4||1||1|
|Section 8 c||Directors from different domains||10||3||2|
|Section 8 d||Govt officials nominated||2||2||2|
Just shocking. As Sanjeev Shivesh says:
The question for us is, whether the RBI’s board composition is because of bureaucratic delays or as a result of insidious design? It is high time that the present directors of the RBI’s central board broke their silence.
RBI former officials raise concerns without being named:
But former RBI officials said this implies that the board’s approval was a formality. The way the demonetisation decision was taken was “highly irregular”, said a former top RBI official, who didn’t wish to be named. He said he did not believe the government and RBI had taken “adequate steps” to minimise harassment of people.
Another said he was concerned at the large number of vacancies in the central board. Of the 14 independent directors, the board has just four. “According to the RTI reply, only three of them were present (at the meeting). That is the quorum,” he said.
Given the crisis if former central bank officials worry before giving their names, one does not where to look. These are the people should should be talking and letting us know the facts.
Each passing day, as facts are coming up (thank god for RTI) one realises why processes matter equally (if not more) as outcomes. If processes are followed outcomes could be binary but if processes are not followed than outcomes usually are negative..