He finally broke his silence on the State Government-RBI agreement. In a scathing piece in a local magazine, Drabu who returned from a self imposed exile wrote about the agreement,
“Even as the interlocutors were talking and soaking up the autonomist sentiment among the people before advocating it, the GOI was working to pull out the only substantive pillar from under the edifice of autonomy.” As economic adviser to the state government, earlier, he had rejected the agreement.
He came down on the agreement on all fronts, not just the underlying political. Pointing out that the impact on J&K Bank would be huge, he wrote, “J&K government has brought RBI into the centre stage of fiscal management of J&K finances. So far RBI had only regulatory oversight. Now they have operational control. JKB is now nothing more than branch of the RBI.”
An important thing he points out in the piece is if the government stays in overdraft for 14 working days, the RBI will stop making payments and the cheques of the government will be dishonoured till the overdraft is cleared. An interesting thing he points out is that the government of the state has been in overdraft every single day since the last 20 years.Regarding the direct impact on the J&K bank he writes that it will mean a decline of 2300 crore in the credit portfolio. “It is most likely that this amount will be deployed outside the state,” he writes referring to the expected resource drainage from the state.
He also makes an interesting observation when he states that as a consequence of the agreement, 78% of the revenue receipts of J&K would come from the union government. He raises a query asking what would happen if the centre delays the releases of money by a week or a month Stating that the agreement will pave the way for nationalisation of J&K bank, he writes that the trigger for the same will come in a couple of years when the Basel 111 banking norms will be put into place and the state government as majority stake owner will be expected to provide about 1000 crores or more for the bank to get its regulatory mandated capitalisation.
“With the state government finances the way they are, it is virtually impossible for it to provide the required capital, which will provide the trigger for the Government of India to come in,” he writes. “All decisions will now be taken on the on mini street in Mumbai instead of Maulana Azad Road, Srinagar. The power has now shifted,” writes Drabu. He has gone further and compared the agreement with the political disenfranchising of the head of the state, when the post of Sadar-e-Riyasat was converted into Governor-a Government of India nominee.