Writing the last weekly column of the year is relatively simple because, typically, one either looks back at the year that is passing or looks forward to likely events next year and makes some predictions. It’s an easy way out as most readers are on vacation at this time of the year, doing better things than poring over a column on banking and finance.

For the Reserve Bank of India (RBI), 2010 has been a challenging year. It kept tightening monetary policy to fight rising inflation, and yet, most analysts found it behind the curve and wanted more aggressive action as the policy rate has been trailing the inflation rate for years now. On top of that, RBI had to deal with a severe cash crunch in the financial system towards the end of the year, with banks borrowing as much as Rs1.5 trillion in short-term money from the regulator on some days. It’s now fairly certain that RBI has not yet reached the end of its rate tightening cycle and, after a pause in its December policy review, it can resume raising rates as early as in January. The policy rate is expected to increase by around 75 basis points next year, in phases, to 7%, making money more expensive for companies and individuals as well as the government. A basis point is one-hundredth of a percentage point.

The alleged bribes-for-loans scam created some ripples in the banking system but could not rock it, essentially for three reasons. First, the money that was lent in exchange for bribes was minuscule. Besides, even though a few bank officials had taken bribes from financial intermediaries to speed up the lending process, they may not have necessarily compromised on loan quality. Finally, larger corruption issues surrounding the Commonwealth Games, telecom licensing and even a 31-story housing society in south Mumbai meant for war widows dwarfed the loan scam as the money involved in these cases was far higher and the alleged swindlers were no boring bankers; they are colourful ministers and politicians with greater recall value.

RBI has quite a few interesting assignments in 2011. On top of the agenda is the entry of new private entities in banking. It is expected to release draft norms for new private banks’ entry sometime in January, and the first licence could be issued late next year after an external committee vets the applications of licence seekers. RBI is also likely to revisit its policy on foreign banks’ play in India in the next few months. It was to be done in 2009 but the regulator could not go ahead with its plan in the wake of the unprecedented credit crunch that gripped the global financial system after the collapse of US investment bank Lehman Brothers Holdings Inc. in September 2008. I am told that the new policy on foreign banks has already been drafted and been lying with the finance ministry for months now.

Yet another item on the RBI agenda next year is freeing savings bank rates, the last bastion of administered rates in the Indian banking system. Bankers are a worried lot these days. If indeed the savings bank rate is freed, the cost of money could go up as competition for such deposits will intensify and unless banks raise the level of efficiency, their profitability will be hit. Given a choice, not too many intermediaries want competition on their turf. For the same reason, the existing banks are not loving the idea of new players’ entry into banking.

While RBI will be busy with all these in 2011, the government has to fill many critical positions in the Indian financial sector. The chairman of the capital market regulator, C.B. Bhave, will retire in February and RBI governor D. Subbarao’s three-year tenure ends in September. One of Subbarao’s deputies, Usha Thorat, has already retired, and another, Shyamala Gopinath, will retire in May. The posts of chairman as well as a managing director in the country’s largest lender, State Bank of India (SBI), will also fall vacant next year. One SBI managing director has already retired, but his successor has not yet been identified. These apart, the chief executives of seven public sector banks will hang up their boots next year.

The process of making such appointments is not transparent. Thorat’s successor has already been identified, but no formal announcement has been made even two months after her retirement. Similarly, a few senior SBI executives have been interviewed thrice in the past few months, but no one knows as yet who will be the next managing directors and who will succeed O.P. Bhatt as chairman. High-profile appointments in India’s financial sector are often shrouded in mystery and marked by intense lobbying by industrial houses and politicians.

Bhave is likely to be succeeded by U.K. Sinha, a bureaucrat-turned-fund manger. Nobody knows whether Subbarao will get an extension. His predecessor, Y.V. Reddy, was given a five-year term at one go, while Bimal Jalan, who Reddy succeeded, was initially appointed for three years and got a two-year extension.

Both Bhave and Subbarao have been fighting for regulatory autonomy. In a recent speech, Bhave said: “Autonomy is not only a matter of creating appropriate structures and legal provisions, but also a matter of perception." Subbarao, in a letter to the finance minister in July, had meant the same when he wrote, “(the) appearance of autonomy is as important as the actual autonomy".

The challenge before the government in 2011 is to correct public perception about regulators’ autonomy. RBI has completed 75 years and the Securities and Exchange Board of India 19, but the heads of both institutions are pitted against a government that doesn’t care much about their independence. This is not good news for the financial system.

Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as Mint’s deputy managing editor in Mumbai. Please email your comments to bankerstrust@livemint.com