Negligence of RBI, or is it criminal culpability?

pmaitra

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Negligence of the Reserve Bank of India, or is it criminal culpability?


Reserve Bank of India logo

In short, the Reserve Bank of India, must, at all time, have no less than 85% of its bullion reserves within India. In other words, it must not hold more than 15% of its reserves outside the country. This is as per the requirements of the Reserve Bank of India Act of 1934, Section 33(5).

The Reserve Bank of India violated that law by holding more than 15% of its reserves with Bank of England (London) and Bank of International Settlement (Geneva).

RBI gets HC notice to explain gold deposits with Bank of England

According to Raghunath Kelkar, the Reserve Bank of India is bound to keep excess gold in its reserves, not deposit outside the country; despite summons, RBI rep fails to appear in court

Dinesh Thite

Posted On Friday, May 04, 2012 at 02:53:08 AM

Atechnocrat-turned-public interest litigant Raghunath Shankar Kelkar has challenged the Reserve Bank of India's (RBI) move to deposit 265.49 tonnes of gold out of its total stock of 557.75 tonnes abroad by filing a public interest litigation (PIL) in the Bombay High Court and demanded that the precious metal be brought back into the country, according to the provisions of the law.

Kelkar (56), who used to manufacture computers, has filed the petition as he found the move by the apex bank in contradiction to the section 33(5) of Reserve Bank of India (RBI) Act, 1934, which stipulates that 85 per cent of its gold reserves should be kept in India.

The Bombay High Court bench comprising D D Sinha and V K Tahilramani heard the petition recently. The court noted that no one appeared for the RBI. The order stated, "Considering the issue involved in the present PIL, we grant one opportunity to the RBI to put an appearance through its lawyer on the next day of hearing and assist the court."

Kelkar had filed the petition on March 1. He said that he had sent three notices to the RBI on the issue, which elicited no reply. He has made the Government of India another respondent in this case. Kelkar is an avid RBI watcher.

He read the 17th half yearly report of RBI on management of foreign exchange reserves, in which the apex bank has said, "The Reserve Bank held 557.75 tonnes of gold, forming about 9.2 per cent of the total foreign exchange reserves. Of these 265.49 tonnes are held abroad in deposits or safe custody with the Bank of England and the Bank for International Settlements.

He said that the RBI move was in violation of the legal provision as it had put 46 per cent of its gold reserves out of the country. The reason issued for the action is that of safe custody. "Does the RBI mean that gold is unsafe in India? Does the RBI think that Indian security forces are incapable of guarding the gold treasure of the country?" he asked.

He raised a question in the petition, "In case there is a war between India and England in future, will our gold held by Bank of England be safe?" He has made three demands in the petition that the RBI be ordered to transfer the gold reserves of the country from the possession of the Bank of England and Bank for International Settlement to its own possession within the country, that till the final disposal of the case, the apex bank not be allowed to take any more gold out of the country and a detailed report be filed as to which officers are responsible for the breach of section 33 (5) of RBI Act.

The price of gold deposited outside the country is about Rs 80,000 crore. Kelkar is pleading his case himself, instead of appointing a lawyer. Earlier, when he thought that the country had suffered a loss of more than Rs 65,000 crore due to alleged mistakes of RBI regarding its market stabilisation scheme (MSS), he filed public interest litigation (PIL) in the High Court in 2008.

His argument was that RBI lost Rs 65,065 crore in 2006-07 due to fall in its valuation of investments in foreign exchange. The RBI had not taken this loss to its profit and loss account and the central government was also not accounting this in its accounts presented to the Parliament, he had said. The petition was dismissed in 2009, on technical grounds, said Kelkar.

â–º Does the RBI mean that gold is unsafe in India? Does the RBI think that Indian security forces are incapable of guarding the gold treasure of the country?

- R Kelkar, the petitioner​
Source: RBI gets HC notice to explain gold deposits with Bank of England - Pune Mirror,Pune Mirror

Reserve Bank of India Act of 1934
33. Assets of the Issue Department.

(5) Of the gold coin and gold bullion held as assets not less than seventeen-twentieths shall be held in [SUP]6[/SUP][India], and all gold coin and gold bullion held as assets shall be held in the custody of the Bank or its agencies;

Provided that gold belonging to the Bank which is in any other bank or in any mint or treasury or in transit may be reckoned as part of the assets.

[SUP]6[/SUP]Subs. by Act 32 of 1951, s. 2, for "the States" (w.e.f. 1-11-1951).
Here is a link to Reserve Bank of India Act of 1934: http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf

[HR][/HR]

Does anyone have any idea whatever happened to that 265.49 tonnes of gold? Did they bring it back to India yet?
 

hit&run

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There is no such concept of 'criminal culpability' in India for public institutions. In India ''Sab kuch chalta hai'' mentality prevails.

BTW it could be simply a case of some thing sinister being hid from population and books being cooked heavily.
 

pmaitra

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@sayareakd Sir,

Would it be possible for you to get details about the PIL filed by Mr. Kelkar? What is the status of the case now? This was filed in Bombay High Court, so you might be able to access the details easily.

Thanks in advance.
 
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pmaitra

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@Bangalorean, please Tweet this to Mr. Modi. The URL will be truncated to 22 characters, and the total length will be under 140 characters.

Is RBI still violating Indian law by keeping India's gold reserve outside India? http://www.punemirror.in/news/india/RBI-gets-HC-notice-to-explain-gold-deposits-with-Bank-of-England/articleshow/31810904.cms
 
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