RBI and GOI: Give and take defused crisis

Give and take*
Learning Board!

This refers to your editorial “Give and take” (The Hindu, November 21). The RBI Central Board, so far debated the main issues on which differences of perception between the central bank and GOI  surfaced, for about 16 hours in two meetings. The board meeting on Monday, reportedly held in a cordial atmosphere, in a way borrowed time to understand the views of both GOI and RBI. The committee approach adopted need to be seen and welcomed in this perspective.
Media has been debating the harm likely to be inflicted on the Indian Economy if GOI invokes Section 7 of the RBI Act, 1934 to ‘discipline’ RBI Governor Urjit Patel and his Team RBI. For now, one prefers to believe that the ‘confrontational’ approach attributed to GOI was a media creation because Sections 7, 8 and 58 of RBI Act are necessary and relevant in the management of RBI. These Sections just ensure the fair and proper management of the Reserve Bank of India. Once the nomination to and selection for appointment of board members and top executives are professionalized, the thought about the splitting the RBI Central Board vertically with GOI nominees on one side and RBI Governor and his Deputies on the other will vanish. We have the example of the Monetary Policy Committee (MPC) behind.
A word about drawing from the RBI’s reserves to adhere to Centre’s deficit target. Let us hope, the Committee which will examine the adequacy of capital and reserves for RBI will get issues like sources for funding of shortfall, if any, in RBI’s capital and reserves and raising of RBI’s share capital from the present level of Rs5 crores to some decent acceptable level, say the equivalent of $100 billion.
M G Warrier, Thiruvananthapuram
*A slightly edited version of this response has appeared in Business Standard (Issues and Insights, Letters) today.


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