Jaimini Bhagwati: Central bank's autonomy and accountability
Jaimini Bhagwati: Central bank's autonomy and accountability: There should be greater transparency about a central bank's role in regulating banks in India and elsewhere...
This refers to the excellent analysis of “Central bank’s autonomy and accountability” by Jaimini Bhagwati (Business Standard, September 16). It is comforting to see that media has taken serious note of this year’s RBI Annual Report and several aspects of the central bank’s role and responsibilities are being widely debated. This is in contrast to the near blackout of RBI Annual Report 2014-15 by the media and analysts.
Traditionally, RBI takes good care to use its annual report to give a comprehensive assessment of the bank’s activities during the year and broadly mention the challenges before it in performance of mandated functions. Last year’s (2014-15) report had the Rajan touch, as it contained a separate chapter captioned “Governor’s Overview” in which the Governor minced no words to express his concerns and anxieties about fiscal and monetary policies. Once submitted to GOI, the report is available in public domain and Parliament gets an opportunity to seek further information from the central bank.
It has to be said to the credit of successive governments at the Centre that compared to other regulatory and supervisory bodies and PSUs (including PSBs), though the tenure of governors and their deputies were not, many a time, long enough, RBI was, by and large lucky to have efficient teams at the top during the major portion of its 80 odd years’ existence. The three year period that has just passed proved the point that more efficient leadership can bring out the best in Team RBI. Let us not be carried away by Dr Subbarao’s laments about appointments. There is no denying that continuity at the top provided by longer tenure for governors and his deputies will be beneficial. But, within RBI, talks about RBI autonomy hovered around policy issues including monetary policy management and GOI support in supervision of banks especially those owned by GOI. Off and on, finance ministry gave an impression that PSBs are nothing but conduits for financing government programmes, forgetting the source of their resources.
RBI has clarity about the role of financial sector in economic development which has been brought out in its reports and elucidated in the speeches of its Governor and other executives in recent years.
M G Warrier, Mumbai