A few questions for RBI and our Ministers to evaluate their efficiencies

By Syed Zahid Ahmad The Reserve bank of India (RBI) being monetary regulator of Indian economy should definitely owe the responsibility for economic imbalances caused in the economy due to monetary stances and resolve the problems caused thereupon, but we hardly see anything like that. We have a few questions for RBI to evaluate its efficiency 1. Indian economy is fueling with high rate of inflation for a longer period of time. 2. Increasing Repo Rate to control inflation has been failed so far. 3. Failed to maintain stability in exchange rate and India despite having better growth rate faces fall in rupee value against dollar. 4. Fiscal deficit for Government of India is continuously moving northward. 5. Monetary environment is not suitable for high trajectory anti-inflationary growth because increased cost of credit with every increase in Repo rate is pushing cost of production higher to increase market prices at wholesale market. 6. Foreign Institutional Investments (FIIs) have not been controlled thus they have been drastically disturbing the capital account balances for India. 7. Completely absence of regulatory stand to control collapse of Micro Finance sector 8. Scheduled commercial Banks (SCBs) Non Performing Assets (NPAs) through Agriculture loans has increased considerably and ultimately Government needed to declare waive off farmers loan worth Rs. 72,000 crores in 2008. 9. At a time when countries like France, United Kingdom and China are streaming their monetary policies to attract interest free financial resources, why RBI is not allowing experiment of Interest free banking and finance in India at a time when Indian Government need interest free funds to reduce its interest payment burdens. 10. Why RBI is not allowing asset based financing as alternative model where collateral is not sought for lending loans to poor and vulnerable section of the society because such loans have caused large increase in NPAs of Banks and Micro Finance Institutions. 11. What RBI has so far did to control failure of Micro Finance Institutions in India which may cause yet another loan waving scheme over Rs. 5,000 crores by Government of India? 12. Why RBI has failed to control decline in purchase power of Indian rupee over period of time? 13. Why RBI is not attempting to structure and issue interest free or 100% equity based securities to mobilize much needed financial resources for infrastructural need of Indian Government? 14. How RBI can assure that downtrodden Indian Muslims community would not remain hindrance for economic growth of India due to its high poverty rate due to unnoticed higher financial exclusion. 15. What RBI will do if even after December 2012, the inflation will be noticed around 9%? The Reserve Bank of India (RBI) through its latest release of Second Quarter Review of Monetary Policy for 2011-12 has also disappointed Indian Muslims once again. Indian Muslims had been demanding for provision of interest free banking system, which could have been possible for experiment if RBI had completely deregulated interest rate on deposit accounts. But RBI has decided to deregulate the savings bank deposit interest rate with immediate effect; banks are free to determine their savings bank deposit interest rate, subject to the following two conditions:

(i) First, each bank will have to offer a uniform interest rate on savings bank deposits up to Rs. 1 lakh, irrespective of the amount in the account within this limit. (ii) Second, for savings bank deposits over Rs. 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates for similar amount of deposit. In fact financial inclusion of Indian Muslim shad never been an agenda for RBI otherwise RBI could have allowed experiment of Interest free banking at least at pilot basis by any Bank. But so far RBIs stand on interest free bank (despite Raghuram Rajans committees recommendation) has been negative in this regard. Its not there only RBI need to answer such questions. There are also a few questions before our Honorable Prime Minister Dr. Manmohan Singh (Economic Reformist) and Hon. Finance Minister (Shri Pranab Mukherjee) serving Government of India (GoI) as well so as to let them evaluate their working efficiency for Government of India.
1. Why India is paying average annual interest of 8% on Government Securities when one

can borrow huge commercial loans from countries like USA and UK at annual interest rate under 2% at a time when their federal rate is around zero percent? 2. What is Prime Ministers stand upon Committee for Financial Sector Reforms (CFSR) recommendation to introduce interest free banking in India with an object to boost financial inclusion of Indian Muslims supposed to be good for Indian economy? 3. Who will bear the ultimate cost of Rs. 500 crores supposed to be laid in next union budget provisioning for 1% subsidy on housing loans? Is it not an uneconomic but purely political move to seduce the mass agitation against constant increase on interest over housing loans? 4. Would Prime Minister allow Ministry of Minority Affairs to let National Minority Development Finance Corporation (NMDFC) to experiment interest free financial products and services to pacify Muslims demand for faith based financial services? 5. Would Indian Parliament ever discuss over Private bill upon Islamic Banking? 6. Why Dr. D. Subbaroa is extended as Governor of India when he is failed to control inflation and has observed saying that Inflation Targeting is neither feasible nor advisable in India during meeting of the Central Bank Governance Group in Basel on May 9, 2011. 7. Will GoI allow RBI to start Credit Default Swap (CDS) when the world has realized that it had been the main instrument behind latest global financial crisis brought into from US to global market? 8. Why Ministry of Finance not ask RBI to experiment structuring and issuing of intertest free securities for mobilization of infrastructure funds for development needs? 9. Has the Finance Ministry sought any advice from RBI or any other private institution to find alternative means or models to reduce the burden of interest payment due to increasing market borrowings and extended fiscal deficit plan by plan every year? 10. Would Hon. Minister of Finance or RBI Governor resign if inflation rate does not come to less than 9% by end of December 2011? Would any media dare to take answers of above questions from our Hon. Prime Minister, Finance Minister and RBI officials? Hope they will do so in national interest.