A supreme adverse commentNew 

There has been a surprising silence over the remarks of the Chief Justice of India on the role of Reserve Bank of India in the Yes Bank case. Several media outlets carried the news story but there haven’t been any significant reaction or response to the censure. On 15 October 2026, in one of the many news stories, Bar and Bench said: The Supreme Court on Thursday strongly criticised the Reserve Bank of India (RBI) for remaining a “mere bystander” while YES Bank’s financial position deteriorated, and its business was allegedly carried out in a clandestine manner. [Yes Bank v. Axis Trusteeship]. Strangely, there has been no reaction or response.

Some supervision!

Lest you not realise, this is a strong comment on the functioning of the monetary authority although the comment should be placed at the doors of the Board for Financial Supervision, established in November 1994 as part of a move to separate the role of regulator and supervisor. In 1997, there was a bifurcation of the supervisory board into banking and non-banking companies – Department of Banking Supervision and Department of Non-banking Supervision, both functioning under the BFS. In simple language, the institutional framework for supervision has been operational for three decades, during which innumerable banking scandals have taken place draining the banking system of thousands of crores of rupees. The CJI’s comment virtually equated the RBI and the BFS, an observation that has not drawn any comment.

In December 2025, the CJI came down heavily on RBI for failing to stem the rot of ‘fake digital arrest’ forcing innocent people to pay ‘ransom’ to avoid ‘arrest’. Unfortunately, there is no noticeable change.

Ordinarily, the Supreme Court does not interfere in ‘specialist’ matters such as banking. It intervenes only when public interest is seriously threatened and where there is some indication of process failure. Which is why it is surprising that even the business media has not responded.

Is the separation invisible?

An institutional framework in operation for three decades does not seem to have registered its presence! The BFS is headed by the RBI Governor as Chairman and a nominated deputy Governor is the Vice Chairman. Of course, the BFS is under the aegis of the RBI, but it is expected to function as an autonomous body, not dissimilar to the separation of Chairman and Managing Director, made mandatory by SEBI.

It is debatable if a deputy Governor should head BFS as the Chairman and reporting to the Board. Let us not forget an important point here – in a company, the report of the mandatory audit committee or governance committee is forwarded not to the MD but the Chairman.

Either there is a real separation or there isn’t. There is no middle path here.

Banking system, not economics

Do we need an economist or someone with a deep understanding of how the banking system functions as the Governor of RBI? The last and the current RBI Governor have been chosen from the Central Government bureaucracy, forcing a sharp break with the tradition of appointing an economist as the RBI Governor. Whatever the government’s reasoning behind the move, there is a sound logic to the shift.

Since the end of the second world war and particularly during the last 50 years, the principal function of a central bank is control of inflation and the principal policy weapon is the monetary policy, which, by changing the rate at which banks borrow, influences demand for money, alternating between raising or lowering depending on its reading of where inflation is at that juncture and likely to be in the foreseeable future.

And that, it can be argued, is largely a matter of data, identifying points for intervention for the RBI. A good statistician can fit that role based on an expertise in grasping movements in interest rates after an intervention, what statisticians call a time series data. In fact, that is the central question – how the economy has responded to every rate change made by the RBI, in effect passing a judgement on the efficacy of the monetary policy as an instrument to control inflation.

Inflation control or curbing frauds?

Let us look at some figures.

In July 2019, the Press Information Bureau reported that “primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of PSBs, as per RBI data on domestic operations, rose from Rs. 2,67,065 crore as on 31.3.2015, to Rs. 8,45,475 crore as on 31.3.2018, and as a result of Government’s 4R’s strategy of recognition, resolution, recapitalisation and reforms, have since declined by Rs. 1,35,366 crore to Rs. 7,10,109 crore as on 31.3.2019 (provisional data as reported by RBI on 2.7.2019)”.

Consider this.

According to an RTI application, “India’s public sector banks have written-off Rs 10.42 lakh crore loans in nine years between FY2015 and FY2023, as per the Reserve Bank of India’s data shared by the union finance ministry in the Lok Sabha in December last year. Of this, the banks have recovered Rs 1.61 lakh crore”. What is recovered is a bare 10% of what was written off! And this thanks to an RTI reply to transparency activist commodore Lokesh Batra (retired).

Hair-cuts (discounts on loans) offered in insolvency & bankruptcy proceedings have increased which is a different way of saying that realisations have declined, according to an ICRA report.

In another report in the media in May 2026, Creditors realised Rs 4 lakh cr; cases involving Rs 14 lakh cr settled in pre-admission stage.

Summing up

A crucial absence in the media is the role of such ‘lost monies’ in raising inflation in the Indian economy. Considering that this has been the problem since the 1960s, with average fraud amounts and bad loans rising being the only ‘change’, the impact of such lost monies should be considerable.

So, that brings us to the question – what should the RBI focus on – inflation or NPAs?

You decide.