Central banks’ QFAs broadly arise from their role as a regulator of the financial system, as a banker to the government, and as a regulator of the foreign exchange system. QFAs of the central bank as a regulator of the foreign exchange often pertain to exchange rate and sterilized operations to offset the effect of unusual cross border capital flows.
·  Although RBI maintains a tight vigil and inspects these entities thoroughly at regular time intervals, the quality of corporate level governance mechanism does not appear to be satisfactory. In its role as the regulator, RBI need not have representation on the bank boards, given the fact that it leads to conflicts of interests with its regulatory functions.