The Joint Parliamentary Commission (JPC), at last declared that the supervisory role of Reserve Bank of India is weak and ineffective.
Talking about the diversion of funds to stock markets by smaller and co-operative banks, the JPC report comments that a good regulator should have anticipated the diversion of funds.Though it is more than a year The Madhavpura Mercantile Co-operative Bank (MMCB)came under in a huge scam, the JPC’s pointing out the circular issued by RBI itself for formation of Audit Committees both in MMCB and City Co-operative Bank, way back in 1994 should be an eye-opener to the RBI. And that these Banks did not form the committee till they collapsed is not at all monitored!
The case of City Co-operative Bank is still worse. Even after having a glimpse of lapses in 1999, RBI issued permission to open four more branches in February 2001.
Who is the RBI trying to convince? Why should the general public who invest in small proportions in these co-operative banks be affected at the end of the day? Can there not be a full stop to licenses once the lapses are noticed?
And a final question – Is the country banking on a weak system?
IMP. NOTE : This blog was started on Sep.17, 2005. The above post is typed and inserted into this blog from my diary entry of the even date.
