Letters: Let RBI be autonomous | Business Standard Letters

Letters: Let RBI be autonomous | Business Standard Letters

My VIEW:

The one page feature on Indian Financial Code 2.0 (August 18, 2015) referred to in this letter could form the background note for further debate on (Draft) Indian Financial Code circulated by finance ministry. That long time after the damaging Financial Sector Legislative Reforms Commission report was inked and submitted in a hurry, the aftermath(the proposed legislation in the form of IFC) has attracted the attention of stakeholders, media, economists and analysts is a welcome signal.

The analysis has rightly pointed out that with the exception of (a) putting in place an arrangement for consumer protection (b) addressing opacity in decision making and (c) establishment of a resolution corporation, the remaining seven objectives of the IFC could be achieved by revamping existing institutional arrangement. Even the consumer protection arrangement will lose teeth, if separated from the central bank which has some carrots and sticks to make recalcitrant managements come round. It is not yet too late for GOI to have a re-look at the whole approach to revamping the financial sector regulatory framework.

The fuss about a tug-of-war between finance ministry and RBI is built on ignorance. The RBI Governor and his deputies (4 in number) are government appointees who do not even enjoy the job security the Comptroller and Auditor General and the Election Commission do have. So, the talk about the number of RBI-nominees and GOI-nominees taking different sides on decision-making is only of academic interest. Let us not under-estimate the capacity for application of mind by professionals. The issue is about the functional autonomy of the central bank and the position of RBI Governor as the leader of Team RBI.

M G Warrier, Mumbai


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