RBI is reputed to be one of the best central bankers in the world. Unfortunately, it has lost its sheen in the recent past.
There are mainly two reasons for this. 1) It is fighting the previous battle. After a fraud has occurred, RBI asks the banks to tighten their control systems so that similar frauds do not happen again. It does not realise that different kinds of frauds are waiting to happen.
2) In banking industry, the service providers ( the commercial banks) are smarter than the regulator (RBI). It may be true in other industries also. The customers (mainly borrowers) are smarter than service-providers. This smartness-asymmetry is the main reason for scams.
There are mainly two reasons for this. 1) It is fighting the previous battle. After a fraud has occurred, RBI asks the banks to tighten their control systems so that similar frauds do not happen again. It does not realise that different kinds of frauds are waiting to happen.
2) In banking industry, the service providers ( the commercial banks) are smarter than the regulator (RBI). It may be true in other industries also. The customers (mainly borrowers) are smarter than service-providers. This smartness-asymmetry is the main reason for scams.
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