Boost financial regulators’ autonomy: IMF-World Bank

Full of wings: The RBI has limited power to force PSB merger, pre-infusing/sack board members and supersed boards. File | Photo Credit: Reuters

A global report based on the recent assessment of the Indian financial system stated that the power and freedom of financial regulators need to be strengthened with legislative and institutional changes.

The current laws allow the government to control senior management and regulators’ boards, the International Monetary Fund (IMF) -Welar Bank reports. The Ministry of Finance (MOF) is an appellate authority for RBI and has the power to reverse subsequent supervisory decisions. In 2019, the government overturned the RBI’s decision to cancel a small urban cooperative bank’s license.

“While the RBI has taken steps to strengthen the corporate administration, it has limited power to force PSB merger, pre-anonymity and remove board members, and boards have been left. The state-owned banks and some insurers are governed by laws to limit the powers of regulators,” said a report based on the evaluation program of the financial sector.

The IMF recommended the MOF to transfer Appellate Authority Shakti to an independent agency.

Similarly, Idardi must have the power to take important supervisory action against the insurer owned by the major state.

(Author, Ashley Cottinho, is with the Hindu business line of this article)