if a group of persons acquires sizeable equity or voting rights in a bank without following the acknowledgement procedure. there is no statutory power for directing disgorgement of shares and as such, if any such acquisition takes place, it may result only in contravention in provisions of br act. the main object of preventing the management of a bank from being captured by persons who are not fit and proper for holding such sizeable interest will not be achieved. rbi should, therefore, have the power to direct, by order, at any time that persons who are not fit and proper to hold such equity or voting power in contravention of these provisions, shall not have voting power. the 2011 bill proposes to confer such power on rbi. this will help prevent unscrupulous persons from exercising control over banks. deposit collection activity currently, collection of deposits from members / shareholders is not treated as acceptance of public deposits. this is a matter of serious concern, particularly, with respect to co - operative societies. deposits are accepted by enrolling members on tap and by collecting nominal bis central bankers ’ speeches amounts from them, exposing such depositors to serious risks. banking regulation act does not apply to such co - operative societies and they are outside the regulatory purview of the reserve bank. it is necessary to plug this important loophole. unless deposits are received from members who have voting rights, the deposits have to be treated as public deposits and the exemption from the provisions of banking regulation act should not be made applicable. every entity that accepts deposits from persons having no voting rights has to be treated as deposit accepting entity and should be regulated as such by rbi. rbi should have the discretion to determine the level and intensity of regulation and supervision depending upon the risk to the system from such entities. financial conglomerates in india, banks are entitled to carry on certain financial activities under the bank subsidiary model. some banks have formed subsidiaries to carry on securities and insurance business. the performance of the subsidiaries affects the balance sheet of the bank. on account of varied activities carried on by the entities in the group which fall within the regulatory jurisdiction of multiple regulators, the risk to the system as a whole posed by such financial conglomerates is difficult to assess. these raise systemic issues and rbi as the regulator of banks needs to be empowered to obtain information, with respect to each of the entities functioning under the umbrella of a bank. the 2011 bill proposes to confer such powers on rbi to get information with respect

history tells us destabilizing inflationary pressures eventually emerge. for a considerable portion of the nineteenth and early twentieth centuries, inflationary credit excesses and prices were contained by a gold standard and balanced budgets. both, however, were deemed too constraining to the achievement of wider social goals as well as for other reasons, and instead the federal reserve was given the mandate of maintaining the appropriate degree of liquidity in the system. over the long haul, the economy ’ s growth is effectively limited to the expansion of capacity based on productivity and labor force growth. to be sure, it is often difficult to judge whether observed growth is soundly based on productivity or arises from transitory surges in output financed in many cases by excess credit, but this is in part what making monetary policy is all about. in that regard and in the current context, how can we be confident we at the federal reserve are not inhibiting the nation reaching its full growth potential? one way is to examine closely the recent economic record. only two and a half years ago, rising commodity prices, lengthening delivery times, and heavy overtime indicated that our productive facilities were under some strain to meet demand. to be sure, since early 1995, those pressures have eased off. however, given the good pace of economic expansion since then, it would stretch credulity to believe that capacity growth has accelerated at a sufficient pace to produce a large degree of slack at this moment. capacity utilization in industry is a little below its level through much of 1994, and pressures in product markets have remained tame. however, falling unemployment rates and rising overtime hours - - as well as anecdotal reports - - unambiguously point to growing tightness in labor markets. with tight labor markets and little slack in product markets, we are led to conclude that significant persistent strength in the growth of nominal demand for goods and services, outstripping the likely rate of increase in capacity, will presumably be resisted by higher market interest rates. if, instead, that demand is accommodated for a time by a step up in credit expansion facilitated by monetary policy, increasing pressures on productive resources would sow, as they have in the past, the seeds of even higher interest rates and a consequent subsequent economic retrenchment. this, then, was the context for our recent action. we saw a significant risk that monetary policy was not positioned to promote sustainable economic expansion, and we took a small step to increase the odds that