RBI tightly regulates commercial banks and mandates their listing to improve transparency. But while it prioritises depositors' interests over those of investors, what about safeguarding the latter's interests?
The economy's financial stability depends on the smooth functioning of banks, which RBI is tasked with ensuring. It has nominee directors on the boards of PSBs and, often, on other banks' boards. Some argue that, as the lender of last resort, RBI must be closely involved in banks' operations. It also relies on banks for its commercial activities and market operations. In this backdrop, it is difficult to perceive that RBI operates at arm's length from the entities it regulates. This could be problematic. Among other concerns, close involvement may create a perception that the regulator is lenient in granting forbearance to banks.
