As a board member, even if he recuses, he will have advance access to what a high-level committee recommends
As in most matters, the world is split over whether or not star industrialist Kumar Mangalam Birla can continue serving on the board of India’s central banker, the Reserve Bank of India (RBI), and remain in contention for a banking licence, applications for which closed July 1.
Supporters of Birla have trolled me on my social media stating that I’ve been too harsh in being among the first to go on record (read, for example, here) that he should quit.
Birla’s supporters think he will run a fine bank and there’s no reason to suspect either his group’s credentials or his interest in swinging the decision to his favour vide his seat on the board.
Within this group of supporters, some suggest a mere recusal from the relevant board meeting will be enough; others see no role for the board in the selection process, pointing out that a high-level committee (HLC) will do the selection process, and Birla won’t be the judge of his own case!
It’s therefore important to read in entirety the selection process (read it here).
I reproduce with emphasis the operative para: “The High Level Advisory Committee will set up its own procedures for screening the applications. The Committee will reserve the right to call for more information as well as have discussions with any applicant/s and seek clarification on any issue as may be required by it. THE COMMITTEE WILL SUBMIT ITS RECOMMENDATIONS TO RBI FOR CONSIDERATION. THE DECISION TO ISSUE AN IN-PRINCIPLE APPROVAL FOR SETTING UP OF A BANK WILL BE TAKEN BY RBI. RBI’S DECISION IN THIS REGARD WILL BE FINAL.”
Needless to say, “RBI” means “RBI Board” because as per the central bank’s website: “...the affairs of the apex banking institution and regulatory authority are governed by its board. The board's functions include general superintendence and direction of the bank's affairs.”
Even if Birla recuses from the operative meeting, he will certainly receive the agenda papers and the recommendations of the HLC, right?
So, Birla and his advisors must draw the fine line between his entitlement to a licence, and his continuation on the RBI board, a position he’s been holding for six years.
At stake is Birla’s own reputation and brand value, something he covets dearly. There’s also an issue of legacy, which other RBI board members drawn from India Inc., not all of them angels, will cite in years to come, when they themselves think about becoming applicants in the coming years.
RBI governor D Subba Rao has rightly pointed the parcel towards the government, which is the appointing authority for board members. "We have to take a view on that," the governor told reporters after the central bank's board meeting in Chennai, in which Birla also took part.
"This (grant of new licences) is a very recent development. Birla has been on the central board for the last six years. We have to discuss that with the government."
A firm nudge to Birla must therefore come from North Block.