The Story of the Reserve Bank: The Ethics of CDs and the Autonomy of the Reserve Bank

Vidyadhar Anskari

The British government was trying to break the practice that the Reserve Bank of India should consult the managing directors of the Imperial Bank before taking any policy decision. In fact, it was the British intention to appoint these managing directors as governors. But the commitment of the Reserve Bank to protect its autonomy. D Deshmukh refused to compromise and ended the practice.

As we saw in the previous article, the British government tried its best to prevent Chintamanrao Dwarkanath (CD) Deshmukh, a genuine Marathi Indian personality, from becoming the Governor of the Reserve Bank in the pre-independence period. He also tried to perpetuate racism in his appointments to the Reserve Bank in the name of providing justice to minorities. C. d Believing that he could not be removed from the governorship, he placed the condition that the deputy governor must be Muslim and European. As deputy governor of Europe, the bank’s chief accountant, C. R. Trevor, was appointed a very friendly officer. For a Muslim, however, it was unanimously agreed that one should not only be highly educated, but should not be branded as casteist. Deshmukh rejected the two names suggested by the then government. After that Deshmukh suggested the name of Wajahat Hussain and the government accepted it. Hussain was a friend of Deshmukh ever since he was studying at Cambridge University. He was the Cooperative Commissioner in Jammu and Kashmir and later became the Revenue Minister. He also had experience in rural credit. Hussain, who joined the Indian Civil Service in 1919, was a man of great intellect and brilliant intellect. He was a member of the Indian delegation to the Third Round Table Conference in 1932. Although his appointment as a representative of the Muslim community tells history, he was also up to the mark of quality. Deshmukh was happy to have a loyal ally in his form. European-born Deputy Governor Rachel Trevor served in the British Army during World War I. After coming to India, he joined the Imperial Bank in 1921. After nearly 12 years of experience in various departments at Imperial Bank, he was integrated into the Bank’s Accounts Department from the very beginning. Thus all three were appointed on August 10, 1943. At the time, Trevor was in charge of accounts and administration, while Wajahat Hussein was in charge of agricultural credit, banking control and ancillary affairs. Wajahat Hussain died of a heart attack on December 4, 1945, while the RBI was in full swing. Since no one had been appointed to the post until July 1946, Deshmukh continued with the bank as a deputy governor.

There was always a conflict between the RBI and the then British government. Lord Montague Norman, the mighty governor of the Bank of England, compared the Reserve Bank of India to a newly married Hindu. According to him, just as a married woman has the right to counsel in the Hindu system of marriage, in the end she has to follow the instructions of her husband. Similarly, the RBI had to take the approval of the Bank of England, the British Government, before taking any policy decision. This was the practice until the British became governor. But angry with the election of C.D. Deshmukh, the British government tried its best to control Deshmukh’s decision-making process. He tried to break the convention that RBI should consult the Managing Director of Imperial Bank before taking any policy decision. The British intention was to appoint the same Managing Director as the Governor. But Deshmukh, who was determined to protect the autonomy of the RBI, immediately put an end to the practice, refusing to compromise.

There are many instances where Deshmukh has taken a very strong stand against the government, giving top priority to protecting the autonomy of the Reserve Bank. In July 1945, the Joint Secretary of the Finance Department wrote a confidential letter to Deshmukh directing the RBI to consult in secret with the government before distributing its profits. Objecting to the government’s suggestion, Deshmukh took a good lesson from the government by clarifying section 47 of the Profit Sharing Act.

Deshmukh told the government that there was no need to consult the government for this mechanical process as the provisions of the Act included transfer of gross profit to assets after depreciation of assets, provision for potential bad debts and other provisions required by law and disbursement. Is required. of dividend. He further explained that it is customary for the government to show profit figures before publication and this is courtesy of the bank. Therefore the government cannot make such a request to the bank. He also said that giving instructions to the government in this regard would jeopardize the autonomy of the bank.

Similarly, in another case, Deshmukh had reprimanded the government and forced the Finance Secretary to apologize in writing. In a telegram to Deshmukh regarding the draft Governor’s Address to the Bank’s Annual General Meeting in August 1945, Deshmukh reacted angrily to the Finance Secretary’s use of the term “dishonest/fraudulent”, saying it was a form of arrogance. is. written apology. After seeing Deshmukh’s Rudravatar, the Finance Secretary withdrew his apology and said that the correspondence on the speech was of temporary nature and would be destroyed after finalizing the draft of the speech.

Finding out where and how this courage came to Deshmukh, you will see that it is in his original thoughts. For this it seems necessary to mention one incident. On 11 November 1944, the name of the College of Commerce in Pune was changed to ‘The Greater Maharashtra College of Commerce’. D Deshmukh. The basic questions raised by Deshmukh while expressing his views at the ceremony testify to his clear thinking as well as the moral foundation behind his assertiveness. In his speech he tried to draw attention to some misconceptions about higher education.

“Does having higher educational qualifications mean having higher moral standards? Are we satisfied that we have developed civic consciousness and a sense of public duty in our country through higher education?” he asked, asking ‘Politics’. There is an area which undermines moral values. Morality is the shield of your higher education, if you take care of it, your personality will flourish. His speech at that time attracted a lot of media attention. The then Principal of Brihan Maharashtra College of Commerce In a letter to D. G. Deshmukh, Karve acknowledged that the path to high ethics is no less than any other higher educational qualification. How did it persist?

  • The author is a banking expert and president of Maharashtra Urban Cooperative Banks’ Association

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(C. D. Deshmukh C. R. Trevor Brihan Maharashtra College of Commerce- Pune)

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First published on July 5, 2021 at 2:27 am

web title: The Story of CDS Autonomy Reserve Bank SSH 93 Reserve Bank Ethics


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