Who will oversee IDBI?
FROM PURELY A technical standpoint, the Centre’s proposal to confer, through legislative action, a banking licence on the Industrial Development Bank of India (IDBI) is perfectly valid. After all, the Reserve Bank of India is a creation of the legislature albeit of the pre-Independence India, and as such whatever the RBI can do, Parliament is well entitled to do so. But from a broader perspective of the conduct of monetary policy, the licence proposal is retrograde. It is never a good policy to have dual authority for something as vital to the economy as commercial banking. The country has had a particularly bad experience of dual authority in the securities market, with the Unit Trust of India consistently resisting regulatory oversight by the Securities and Exchange Board of India citing its status as a special creation of Parliament, in the run up to the crises on US 64 and assured returns schemes under its Monthly Income Plans. Equally, the problem confronting the cooperative banki
