Does the second financial inclusion committee appointed on 23rd September render the Dr Chakrabarty Committee practically irrelevant and redundant?

I had previously argued that the Reserve Bank of India (RBI) should disband the new committee on financial inclusion, that was appointed on 23 September 2013, for various reasons outlined in previous Moneylife articles. It is also a month since the first Moneylife article came out, and there has neither been any clarification from the RBI nor any action on the lines that Moneylife had suggested.

When the country is struggling for resources, I am not sure that it is a great idea to have two independent committees on the same topic of financial inclusion at the same institution, especially when the larger mandate and the terms of reference of both committees are very similar. After all, the job needs to be done and it does not matter which committee does the work, so long as the mandate is achieved! In fact, imagine the spectre of two different committees on financial inclusion at RBI coming out with very contradictory recommendations—it would become totally counterproductive and an administrative nightmare on whose recommendations to accept and why!

So, I feel that the time is now ripe for the Dr KC Chakrabarty headed financial inclusion committee (appointed in 11 October 2012) to resign en masse so that the Dr Nachiket Mor chaired concurrent financial inclusion committee (appointed on 23 September 2013) gets a free reign to pursue its mandate in a comprehensive manner. I am sure that the respected governor of the RBI, the deputy governors’ and independent board members of the RBI will agree on the need to save scare resources (at a time of economic crisis such as this) and not have two high powered committees on the financial inclusion working concurrently at the RBI!

Two other points deserve mention.

First, the Dr KC Chakrabarty Committee consists of several members of the Central Board of Directors of the RBI – namely, YH Malegam, Prof Dipankar Gupta, Ela Ramesh Bhatt, along with well known experts like Prof MS Sriram (independent researcher & adjunct professor, Indian Institute of Management, Ahmedabad and Indian Institute of Management, Indore), RS Sharma (director general, Unique Identification Authority of India—UIDAI), B Sambamurthy (director, Institute of Development & Research in Banking Technology -IDRBT), Rama Vedashree (vice president, NASSCOM and member of NABARD's advisory board on Financial Inclusion Fund and Financial Inclusion Technology Fund) apart from the chairman, Indian Banks' Association and secretary, Department of Financial Services, Government of India. This certainly makes the Dr Chakrabarty Committee a very high powered committee.

And the above composition of the Dr Chakrabarty Financial Inclusion Committee raises some very interesting issues for corporate governance at RBI, which I leave to the Moneylife readers and general public, RBI board and the committee members and other stakeholders to ponder:

1. What do the independent directors from the central board of the RBI – namely—Mr Malegam, Prof Gupta and Ela Ramesh Bhatt—think of the present practice of having two high powered concurrent committees at RBI on the same topic of financial inclusion?
2. Do they concur with this practice, especially because the second financial inclusion committee appointed on 23^rd September renders the Dr Chakrabarty Committee (in which they are all members) practically irrelevant and redundant?
3. Did the board of the RBI meet and endorse this decision of appointing a second financial inclusion committee when there was already such a very high powered financial inclusion committee—with several RBI board members and renowned experts—live and functioning under Dr KC Chakrabarty? It should be noted that the Dr Chakrabarty Committee has (apparently) met three times during its brief tenure and started work in right earnest!
4. If the board of the RBI did not meet and endorse this decision, have the independent non-executive members of the board of the RBI found out who made this decision, why and in whose interest? Is it not their duty, as independent non-executive directors to do so from an accountability and corporate governance perspective?

Let us set the record straight. The matter concerned is not something that can be treated lightly. A very high powered LIVE committee chaired by a very senior deputy governor of the RBI and comprising of several RBI board members, secretary of the Department of Financial Services and renowned outside experts has been effectively sidelined!

5. What can be said about existing practices at the RBI with regard to the appointment of such very high powered committees?
6. Should not the board of the RBI (and especially, the independent non-executive members on the board) look into the corporate governance implications of the same?

And without any doubt, if the independent non-executive members of the RBI board keep quiet and ignore this serious matter, then, one would have no option but to come to the (disastrous) conclusion that the board of the RBI is indeed a rubber stamp board with very little independent thinking!

A second and final point is also in order. Given that the Dr Chakrabarty Financial Inclusion Committee comprises of legitimate stalwarts in several respective fields, I wonder whether any of them felt a genuine need to resign voluntarily from the Dr Chakrabarty Financial Inclusion Committee that has become completely redundant NOW!

(Ramesh S Arunachalam has over two decades of strong grass-roots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural and urban development and urban poverty alleviation across Asia, Africa, North America and Europe. He has worked with national and state governments and multilateral agencies. His book—Indian Microfinance, The Way Forward—is the first authentic compendium on the history of microfinance in India and its possible future.)