RBI complains too much; its role has been better defined, powers expanded over four years of Narendra Modi govt
There is a deluge of expert and academic opinion on the current Reserve Bank of India - Government ‘confrontation’. To quote: “Governments that do not respect central bank independence will sooner or later incur the wrath of the financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution.” Now, for a top RBI official, this is unusual. Looking back to 2008, recall the well-publicised differences between former finance minister Chidambaram and one of the most seasoned and balanced Reserve Bank Governors Y V Reddy over the foreign ownership of banks. Looking further back to 1957, then RBI Governor B Rama Rau could not come to terms with the alleged interference in monetary policy of finance minister T T Krishnamachari. Given this record, the RBI governor’s job should be to engage with the government on its concerns, and try to find workable solutions within the central bank’s institutional mandate, relying on his institution’s technical expertise and economic reasoning to make his case.
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