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3) For RBI, the framework for the exercise of powers in private sector banks is different from the one for public sector banks. Critically examine what issues this dual control over banks gives rise to? Does this make RBI toothless? Comment.

Topic:  Statutory, regulatory and various quasi-judicial bodies

3) For RBI, the framework for the exercise of powers in private sector banks is different from the one for public sector banks. Critically examine what issues this dual control over banks gives rise to? Does this make RBI toothless? Comment. (250 Words)

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Why this question?

Role of RBI is in news thanks to Nirav Modi scandal. Important issue also because of overall banking crisis that exists and role RBI has in it.   

Key demand of the question:

Examine objectively how the dual control i.e. two set of powers to deal with private and public sector banks give rise to many issues related to RBI’s powers, role of the Finance Ministry  that eats RBI’s share of powers etc. 

Directive Word:

Critically examine: Here, you have to be critical i.e. being objective. Don’t blame RBI or Finance Ministry harshly. Give facts and present opinions (of others wherever necessary). 

Structure of Answer:

In the introduction write in 2-3 lines how RBI has become weak or victim over the years, and why there is a need for giving it more autonomy and powers. 

In the body, divide answer into TWO main parts: one to critically examine issues related to dual control; Second is your opinion – if RBI has become toothless or not. In the first part, focus on 4-5 issues from the perspective of private banks, co-operative banks, finance ministry, public sector banks and RBI. 

In the conclusion, write 1-2 lines about need for reforming the governance structure of public sector banks and making RBI accountable. 

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