After CBI, it is RBI: serial killing of institutions 

It was the CBI last week; it’s the RBI that is in news this week. The Modi government is lurching from one crisis to another. But the RBI problem is a much more serious issue involving the health of Indian economy per se.

What is the problem between the Finance Ministry and the RBI? The government wants RBI to ease the lending process, particularly to the small and medium businesses, and allow liquidity in the market. But the RBI is not willing to buy the government view. Its version is that there is already pressure on public sector banks due to mounting NPAs for a long time now.

Any more liberal lending to businessmen could trigger a major financial crisis. Differences between the two have reached a point where RBI Deputy Governor has publicly aired his view indicating that no less than Governor Urjit Patel is not in favour of flooding the market with cash.

The Finance Minister and the RBI Governor met last Tuesday, October 23, to resolve the differences. But the meeting led to no solution. The RBI, on the same day, issued a statement declaring that there was no shortage of liquidity for non banking finance companies. So, the stalemate continues. Both the market and the businesses continue to be in dark about what direction the RBI will take now.

Is it not a clear indication of a major crisis looming over the economy? But the government, instead or resolving an impending crisis, is compounding it by confronting the RBI on an issue which is the Central Bank’s prerogative to decide.

Be it the CBI or the RBI, the problem lies in the Modi government’s attitude towards institutions that are the bedrock of a democratic setup. It is basic knowledge that a democracy functions with the devolution of powers to key institutions. But if a Prime Minister starts functioning like a King, imagining his word is the law, democracy begins to face problems.

The Modi government seems to be running on two-and-a-half power centres. All power is concentrated between the Prime Minister and the ruling party president with the National Security Advisor (NSA) chipping in as the troubleshooter trying to fix those who are unwilling to swallow the dictates of the PMO.

This is against democratic norms. Both the CBI and the RBI are victims of an autocratic style of functioning wherein an individual’s word carries more weight than an institution’s wisdom. It is the violation of democratic principles.

It is, therefore, not just the CBI or the RBI which are facing problems. It is now a national crisis affecting almost all institutions that safeguard Indian democracy. It is dangerous for the country. It’s, therefore, time for the nation to correct its path before it gets too late.