Slashing of RBI governor’s powers
Dear Sir,
At the outset, I wish to thank Gulf Times for publishing my letter, “Indian government move worries bankers” (July 28). My arguments have further been corroborated in a report published by Gulf Times on July 29, under the headline, “Move to strip Rajan of power over India rates faces backlash”, credited to the Bloomberg News Agency.
A few interesting and illustrative points emerge from the report. When India is on a well-planned growth plan, what is the urgency and necessity to appoint four members from the government and three from the country’s central bank (Reserve Bank of India - RBI) with no veto power for the governor in the monetary policy committee?
As rightly mentioned in the Bloomberg’s report, in advanced countries like the US and the UK, most members of similar committees are from the central bank. This view has been echoed by several bankers and economists, both in India and outside.
In fact, a report from RBI deputy governor Urjit Patel last year had, in no unclear terms, proposed that the monetary policy committee to have five members, all from the country’s central bank with no nomination from the government. Nevertheless, in sharp contrast, the present draft bill proposes a monetary policy committee with seven members, three from the country’s central bank and four nominated by the government.
This is certainly a wrong step and will pave the way for conflicts and tensions between the RBI and the finance ministry. Under all circumstances, the Reserve Bank’s legacy built over last eight decades by veterans and professional stalwarts, needs to be protected and safeguarded, if not, further enhanced, by those who have a passion for the Indian banking sector.
It’s high time for Rajan to prove his mettle once again in the larger interests of the Indian banking sector in general and the nation’s economy in particular.
V Kalyanaraman
(e-mail supplied)
