Officers of the Reserve Bank of India (RBI) have formally raised a red flag over the creation of a new unified cadre to undertake supervisory and regulatory functions, cautioning that it could impact the central bank’s supervisory functions in the long run. Officers are also unhappy about HR bias in performance reviews and promotion policies.
Moneycontrol has reviewed a copy of the letter the RBI officers have written to Governor Shaktikanta Das. In the letter dated 25 June, the RBI Officers' Association (RBOA) said the recently constituted Specialized Supervisory and Regulatory Cadre (SSRC) will adversely impact the central bank's supervisory functions.
"The bank will lose the benefit of drawing upon from the wider pool of talented officials for its supervisory/regulatory functions. At the same time the officers in the cadre would lack the exposure in other area, therefore, there is an urgent need to review the decision related to SSRC," they said in the letter.
On November 1, the RBI reorganised its regulatory and supervisory Departments. Till then, the supervision of financial sector entities was undertaken through three separate departments, viz., Department of Banking Supervision, Department of Non-Banking Supervision and Department of Co-operative Bank Supervision.
Similarly, the regulatory functions relating to financial sector entities were carried out through three separate departments, viz., Department of Banking Regulation, Department of Non-Banking Regulation and Department of Cooperative Banking Regulation.
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"With a view to having a holistic approach to supervision and regulation of the regulated entities so as to address growing complexities, size and inter-connectedness as also to deal more effectively with potential systemic risk that could arise due to possible supervisory arbitrage and information asymmetry, it has been decided to integrate the supervision function into a unified Department of Supervision and regulatory functions into a unified Department of Regulation with effect from November 01, 2019," RBI had said.
Officers stay away from new cadre
Till now, only about 5 percent officers of the proposed strength (around 1,500) have opted to join the new Specialised Supervisory and Regulatory Cadre (SSRC) of the RBI, Moneycontrol reported on June 16.
The RBI officers were unhappy with the structure of the new department, and cited HR issues such as mobility, lack of promotion opportunities and performance appraisal system. Besides, the RBI officers are concerned with the way recent promotions were done and with the performance management system.
“The scheme did not find takers because it was prepared without detailed study, lacked clarity, vision and experience in administration. The Bank has consistently ignored officer community in recent years and they have hardly engaged RBIOA for any discussion to find a right solution for the problem in hand," the Officers said in the letter to the Governor. Till 1974, the RBI had a separate cadre for regulation/ supervision; effective from May 22, 1974, the seniority of officers in all grades was merged pursuant to the recommendations of the Cadre Review Committee.
Initially, the RBI had fixed January 31 as the deadline for officers to make a choice. But due to poor participation, the deadline was extended for another six months until July 31. Even though the second deadline is nearing, only a few officers have opted in so far.
Also, RBI officers have asked the Governor to review the performance appraisal and promotion policies of officers. The RBI has been following 'Bell Curve' based performance management system which follows an arithmetic average to arrive at equal distribution and resultantly "above" and "below" average performers are arrived at in the curve.
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"RBI as an organisation performs several functions through its various Central Office departments and Regional Offices. Each department varies in its mandate and work requirement, where it is difficult to measure/ quantify the output/ productivity of its employees since the work involved isn’t target based. This brings in a feeling of bias/ injustice among employees when forced banding is applied to normally distribute the performance," said officers.
Officers also alleged that the promotion policy within the RBI has become more uncertain and difficult. According to them, there have been gradual arbitrary amendments in the promotion criteria from time to time. The Time Bound Promotion (TBP) was introduced on March 16, 2012 and since its introduction, has been modified several times. In year 2018 alone, the promotion policy was changed twice, Officers say.
“The frequent changes without involving the stakeholders has become a recent trend in the Bank. Earlier, HR always used to engage with us at least to know the pulse but off late, this has not been the case which has demoralized the entire workforce of the Bank,” the officers have said.
The RBI's regulation and supervision functions have a critical role to play in the banking industry especially in view of the rising number of fraud cases and supervisory lapses. These include fraud cases in banks such as Yes Bank, PMC Bank and Punjab National Bank. Experts have reminded time and again that a weak RBI infrastructure will adversely effect the supervisory functions of the central bank.Follow our coverage of the coronavirus crisis here