Reticent Urjit Patel turn eloquent

RBI Governor Urjit Patel's silence on demonetization made him an easy target for critics. Almost all public statements on demonetization were made by economic affairs secretary Shaktikanta Das giving rise to the impression that government had sidelined RBI and usurped its policy role, confining it to mere execution. But the Nirav Modi-PNB scam has forced Patel to shun reticence and speak out on several contentious issues without mincing words. 

• Patel rejected accusations that the regulator’s laxity was to blame for the Rs.13,000-crore fraud at state-owned Punjab National Bank, suggesting that laws need to be changed to ensure punitive action can be taken in time and effectively putting the onus on the government. 
• He made a pitch for withdrawal of legal immunity from RBI regulations that PSB's enjoy, saying it had led to considerable emaciation of RBI powers over corporate governance. 
• Patel made an indirect case for privatisation or reducing the role of state-owned lenders. He said the government should decide what to do with public sector banks if it wanted to optimise the use of taxpayer money.
• He asserted that Banking Regulatory Powers in India are NOT Ownership Neutral. He then went on to read out chapter and verse, the list of clauses and sub-clauses from the legal landscape to underline the helplessness of RBI when it came to regulating public sector banks, which account for nearly 70% of Indian banking.
• Making this worse is the persistence of delays, of criminal investigation and judicial process. The Governor points out that “RBI data on banking frauds suggests that only a handful of cases over the past five years have had closure, and cases of substantive economic significance remain open. As a result, the overall enforcement mechanism is not perceived to be a major deterrent to frauds relative to economic gains from fraud.”
• Nearly nine months later – after two rounds of selection meetings – the Deputy Governor’s post is yet vacant.
• RBI is faced with constraints. It cannot act to remove directors or the management of public sector banks. But does it need the ultimate power to prevent malfeasance? The RBI is empowered to give directions where it is in the public interest. How often has that been deployed? Has the power of inspection been utilised? A call for more power is not a credible demand when existing provisions have not been leveraged.
• RBI said: “The risks arising from the potential malicious use of the SWIFT infrastructure” has been a risk factor and it had “confidentially cautioned and alerted banks” on three occasions since August 2016 and added, “Banks have, however, been at varying levels in implementation of such measures.” But RBI never cautioned savers about these risks in the banking systems.
• He said, “If we need to face the brickbats and be the Neelakantha consuming this poison, we will do so as our duty. We will persist with our endeavours and get better with each trial and tribulation along the way." He went on to saying that promoters and banks should seek to be on the side of the devas (the gods) rather than asuras (the demons) in this amrit manthan. 

Despite his image of a reticent, submissive man, Patel withstood pressures from various sides after demonetisation, stuck to a low-inflation regime, didn't lap up the proposal to create a bad bank and opposed farm debt waivers, calling them moral hazards posing inflation risk and undermining an honest credit culture. With his robust defence of the central bank and castigation of public sector banks, Patel has buried the image of a central banker of few words. And with his mythological references, he has shown he can find eloquence when required. 

The full text of RBI Governor's speech

Responsibility shared by two persons is not 50% each. It is 10% each.

While Bank's proper management rests with the owners (MoF in case PSB's), Urjit Patel, RBI Governor can't resort to offensive in the blame game initiated by Arun Jaitley by invoking mythological comparisons and absolve of its regulatory failures.

Had Urjit Patel shown same courage in 2016, the harebrained demonetization wouldn't have happened and nation would have been spared of its consequences borne mostly by lower class people. These discussions, reasons and advises will be engaging our time and leads to nowhere. While the loot may never get recovered, what is important is elimination of recurrence of such events in future. Urjit Patel must know his responsibility as institutional head never to allow government interference beyond a point and preserve institution's independence and integrity at all costs. Government as owner of PSB's is solely responsible for their proper functioning and the regulatory rules governing PSB's and private banks must be same. RBI's regulatory role in preserving depositors & lenders interests and integrity of banking system can not be compromised.

Laws grind the poor, and rich men rule the law

The significant achievement of human civilization during past 300 years is the evolution of law in a structured manner and conceptualization and enforcement of 'equality before law'. It is the fact that the poor suffers in the hands of law, and the rich men enjoys the life without much botheration about law. A poor man getting into any problem cannot come out of the police station or court easily and jailed easily with no means to get a bail. Whereas a rich politician or businessman, in most situations, come out of the station very easily with the influence of money and muscle power avoiding jail with simple bail. Accused poor is always always convicted and the accused rich are mostly acquitted. This is what happening in our country. 

• A law is made with the express intent to help people in getting justice through a legal system, thereby aiming to achieve the ‘greatest happiness of the greatest number’. But very often the law fails to serve this purpose.
• There just cannot be one law for the rich and connected, and another for the poor and unconnected. Everyone is entitled to be treated equally in his dealings with the public authorities.
• The innocent, simple, illiterate and the poor cannot access legal procedure because it is highly expensive, complicated and time-consuming to them. So they look upon law from a distance as a frightening scarecrow.
• On the other hand, some people in society like those strong, greedy birds, tame, twist or tarnish a law and use it for their own benefits. Some others follow suit and seize the opportunity, too. Thus the law is made into a no-more frightening, rather a tattered scarecrow.
• It is this second group that is mainly responsible for making many laws ineffective. Not only that, they make law an accomplice in fulfilling their greed for power and possessions.
• Our laws are adequate for the purposes intended. Our weak point is the enforcement part. We have a system, but we do not seem to be able to work the system according to the Rule of Law which posits three things: (1) that everyone is deemed equal before the law; (2) that the law is applied in its generality; and, (3) that the law is applied neutrally.
• Generality of laws, the Equality of everyone before the law, and the Neutrality of the law means that if any law is used to target a person, a group or a class of persons, then the Rule of Law is breached.
• The Commercial Division of High Courts Bill, 2009 has as its foundation a special provision with the objective of achieving quicker disposal by expert tribunals that involve a sum of Rs.5 crore or more. The idea is to facilitate their early disposal so that the rich who are involved in such disputes do not have to wait for too long for a final adjudication. 
• Meanwhile, the poor person whose litigation mostly involves a value that is below Rs.5 crore has to wait for the outcome at the Munsiff’s Court, the District Court, the High Court, and the Supreme Court that take decades before a final judgment comes. Often it takes more than a generation. 
• Obviously the rich are favoured by helping them achieve early finality while the poor and the middle classes have to hang on often for a life-time for an outcome. 
• Democracy is fundamentally equality of the judicial process. To make the monetary value of a commercial dispute the basis of classification is undemocratic. Indian socialism and democracy are the victims of feudalism, capitalism and corporate control, even as the courts enjoy longevity without accountability. 
• The legislation classifies litigation into two categories. The poor litigant will wait for the somnolescent process and leisurely pronouncement and the wealthy litigant will have his case speedily terminated. If this be the differentiation, it is horrendous and outrageous in a socialist democracy. Perhaps Oliver Goldsmith was right when he said “Laws grind the poor, and rich men rule the law.”

Let justice be done, though the heavens fall.

Be ye ever so high, still the law is above you ... Thomas Fuller