Home >industry >banking >RBI, govt at odds over proposed data warehousing body

Mumbai: The Reserve Bank of India (RBI) has raised concerns over a proposed data warehousing body, the Financial Data Management Centre (FDMC), on grounds that it will reduce the independence of regulators, said two people familiar with the matter.

The central bank is also concerned that its ability to take corrective measures in case of systemic issues or market manipulation would be hampered, said one of the two people cited above, declining to be named. It raised these concerns at a meeting of the Financial Stability and Development Council (FSDC) on 29 August. Mint has reviewed a copy of the minutes of that meeting.

In the Union budget this year, the government proposed to create the data warehouse as a statutory body to facilitate integrated data collection for the financial sector. The data warehouse is expected to provide a full picture of the entire financial system and reduce compliance costs for financial companies.

“If a statutory body is created, then the regulators would not be independently in the position to collect raw data in its original format," said the first person cited ab

An RBI spokesperson declined to comment on queries sent by Mint on 12 September.

The idea to set up FDMC was first floated in 2014 by the Financial Sector Legislative Reforms Commission (FSLRC), a panel set up in 2011 to review and rewrite the legal-institutional architecture of the Indian financial sector.

Initially, FDMC was to be set up as a non-statutory body to collect financial data and provide easy access to all regulators. Soon after, a task force was created to streamline the modalities and structure of FDMC.

“During the consultation process, RBI clarified that as per the RBI Act, they could share only consolidated data (and not raw data). This led to the government tweaking its plan and setting up FDMC as a regulatory body," said the second person.

Now, a draft bill proposes that FDMC collect all data from the regulators as received by them in the initial phase and directly from the regulated entities at a later stage, said the minutes of the meeting, reviewed by Mint.

RBI’s push-back comes at a time when the central bank is facing mounting pressure to reveal data that can be used to track illicit money flows and the names of loan defaulters.

On 11 August, the special investigation team (SIT) on black money had written to RBI to share information on foreign exchange transactions and create a mechanism to track illicit flow of funds with the enforcement agencies. While RBI maintains an internal database for foreign exchange transactions, the SIT said the data it has been given showed that there are gaps in monitoring trade flows.

In February this year, the Supreme Court made the central bank a party “in public interest" in a 2003 case related to bad loans advanced to a few companies by the state-owned Housing and Urban Development Corporation Ltd.

The case was filed by the Centre for Public Interest Litigation, an activist organization headed by lawyer Prashant Bhushan. Indian banks are sitting on toxic assets of Rs6.3 trillion.

In April 2016, RBI gave the names of wilful defaulters to the Supreme Court asking the names be kept confidential. RBI’s argument was that the intent in every default is not malicious.

“A regulator’s concerns could typically be around whether its own right to seek information would be eroded and taken away if there were to be an FDMC that plays this role," said Somasekhar Sundaresan, an independent counsel. “If the regulator’s capacity to get data from market participants and process is not eroded, worries about the regulator being undermined by a system of collecting, pooling and analysing data would be unfounded."

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