Opinion | A thin line divides RBI autonomy, alignment
6 years, 1 month ago

Opinion | A thin line divides RBI autonomy, alignment

Live Mint  

The tawdry, and discreditable, public feud between the government and the Reserve Bank of India seems to indicate that, in the midst of many shortages, the government is hoarding reserves of surplus political capital. Things must have gone terribly wrong and relations deteriorated irreconcilably for the government to situate a routine central bank board meeting squarely in the piazza of public opinion. Tension between the government and the central bank is healthy, but the past decade’s steady sound of the government chipping away at RBI’s powers and autonomy has now reached a crescendo. The government’s current surge of ire is the accumulation of several RBI steps: the 12 February circular which redefines loan defaults; prompt corrective action against 11 public sector banks that circumscribes their ability to expand loan books; refusal to heed government entreaties to open a liquidity window for beleaguered non-banking financial companies ; relaxing Basel-plus capital adequacy norms, among others. It is also during this period that the government used its legislative powers to amend the RBI Act to nominate an additional bureaucrat to the central bank’s board, or to create a super-regulatory body in an attempt to diminish RBI’s primus inter pares status among regulators.

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History of this topic

Why RBI is central to the country’s economy
1 month ago

Why RBI is central to the country’s economy

New Indian Express  

The art of setting interest rates Maintaining macroeconomic stability and financial stability is the holy grail of any central bank. The pursuit of sustainable growth and low and stable inflation have been fundamental to central banking activities since the early 19th century, though financial stability got equal prominence, thanks to black swan events like the Great Depression of 1930s and …

DC Edit | FM, new RBI chief signal cut
1 month ago

DC Edit | FM, new RBI chief signal cut

Deccan Chronicle  

Finance minister Nirmala Sitharaman’s statement that inflation is a major challenge faced by countries around the world and that no country can solve it alone appears to have set an agenda for new RBI governor Sanjay Malhotra, who took charge a few hours before she made this statement. During the tenure of Shaktikanta Das, the RBI remained squarely focused on …

DC Edit | Will RBI tweak inflation focus?
1 month ago

DC Edit | Will RBI tweak inflation focus?

Deccan Chronicle  

The appointment of Sanjay Malhotra as the new RBI governor continues the long-standing tradition of IAS officers heading the Central bank, a quasi-autonomous body that decides the country’s monetary policy. Mr Malhotra took over the charge of RBI from Shaktikanta Das — the second longest serving governor after Sir Benegal Rama Rau’s stint of seven years and 197 days — …

From North Block to Mint Street: Sanjay Malhotra has his task cut out as RBI’s next governor
1 month ago

From North Block to Mint Street: Sanjay Malhotra has his task cut out as RBI’s next governor

Live Mint  

On Monday, we finally got the news that every Indian with even a passing interest in the economy had been waiting for. Ending weeks of speculation over whether Shaktikanta Das would be given an extension of an already extended term, the government announced that revenue secretary Sanjay Malhotra will take over as the next governor of the Reserve Bank of …

‘Abandoning RBI’s inflation target regime could be risky, counterproductive’
4 months, 3 weeks ago

‘Abandoning RBI’s inflation target regime could be risky, counterproductive’

The Hindu  

The Reserve Bank of India's inflation targeting regime has worked well and need not be abandoned in favour of a more discretionary regime that could be risky and counterproductive, a new research paper has said. The paper titled 'Inflation Targeting In India: A Further Assessment' said the weight of food-price inflation in the CPI inflation basket should be reduced to …

Key decisions of central bank cannot be left to politicians, says former RBI Governor Subbarao
8 months, 3 weeks ago

Key decisions of central bank cannot be left to politicians, says former RBI Governor Subbarao

The Hindu  

Former Governor of the Reserve Bank of India Duvvuri Subbarao on April 24 said key decisions tasked to the central bank such as reining in inflation änd ensuring price stability cannot be delegated to politicians as the latter have a short cycle. “You can’t leave those decisions to politicans.,” the former IAS officer said, pointing out that decisions on price …

RBI can take global leadership in balancing growth and inflation control: Narendra Modi
9 months, 1 week ago

RBI can take global leadership in balancing growth and inflation control: Narendra Modi

The Hindu  

The Reserve Bank of India having achieved the unique feat of balancing growth and inflation control, can become a model for the world and take global leadership, Narendra Modi, Prime Minister of India, said on Monday while speaking at a function to mark the commemoration of RBI’s 90th year in Mumbai. Stating that balancing inflation control and growth was a …

RBI Monetary Policy: Central bank likely to hold rates, maintain hawkish stance
1 year, 3 months ago

RBI Monetary Policy: Central bank likely to hold rates, maintain hawkish stance

India Today  

The Reserve Bank of India's Monetary Policy Committee is expected to maintain key interest rates in its upcoming decision but maintain focus on inflation amid rising global crude oil prices and sustained economic growth. In a survey of 71 economists conducted by news agency Reuters in late September, all but one anticipated that the RBI would keep its key repo …

RBI shouldn’t play the game of ‘For your eyes only’
1 year, 10 months ago

RBI shouldn’t play the game of ‘For your eyes only’

Live Mint  

The Reserve Bank of India’s insistence on keeping ‘confidential’ its communication to the government explaining why inflation stayed for three quarters above its 6% upper limit under the flexible inflation targeting framework that India set for itself in 2016 is perplexing and vexatious. The vexation on monetary policy arises from the expectation that in unconventional times, the value of the …

Reimagining how the Reserve Bank functions
2 years ago

Reimagining how the Reserve Bank functions

Hindustan Times  

The Supreme Court judgment on demonetisation last week appears to have reignited the debate on the relationship between the Reserve Bank of India and the Union government. The parliamentary committee wants to ensure that financial regulators such as RBI are adequately prepared to support India’s growth journey, the chair of the committee, Jayant Sinha, said in an interview to Mint …

How ideology muddled inflation control in India
2 years, 4 months ago

How ideology muddled inflation control in India

The Hindu  

The Governor of the Reserve Bank of India reportedly stated that the inflation rate would be brought to its target level of 4% within 24 months. Though the characteristics of India’s economy vary substantially when compared to those of the industrialised West, their governments follow the same approach to inflation control, termed ‘inflation targeting’ and implemented by their central banks. …

RBI to remain flexible while aiming to tame inflation: Governor Shaktikanta Das
2 years, 6 months ago

RBI to remain flexible while aiming to tame inflation: Governor Shaktikanta Das

The Hindu  

Reserve Bank of India will continue calibrating policy to preserve and foster macroeconomic stability while bringing down inflation and will remain flexible in its approach, Governor Shaktikanta Das said on Saturday. The global economy is going through an uncertain time and concerns around growth and inflation persist, but the central bank believes that there could be some respite from rising …

Central banks are now playing catch-up but in different ways
3 years, 2 months ago

Central banks are now playing catch-up but in different ways

Live Mint  

Having been late in identifying persistent drivers of inflation, central banks in advanced countries are—as a group—now figuring out how best to play catch-up on monetary policy. A growing number of central banks in what economists would characterize analytically as small open economies, including Australia, New Zealand and Norway, have already started to tighten monetary policy. The Bank of England …

What RBI policymakers should be mindful of this fiscal
3 years, 9 months ago

What RBI policymakers should be mindful of this fiscal

Live Mint  

Recently, I read a paper, titled Overcoming the Tragedy of Super Wicked Problems: Constraining our Future Selves to Ameliorate Global Climate Change, that presented a framework for tackling climate change. Separately, the authors of the first paper referred to here note that big questions in social science involve contingent and complex causality, and that the search for ‘laws’ and invariant …

Needed: A new relationship contract between RBI and govt
4 years, 4 months ago

Needed: A new relationship contract between RBI and govt

Live Mint  

Two recent books, one by former Reserve Bank of India governor, Urjit Patel, and the other by former RBI deputy governor, Viral Acharya, have reignited the debate on central bank autonomy in India. Section 30 of the RBI Act for instance, allows the government to “supersede” the RBI central board. The third lever of government control lies in the composition …

RBI policy: Central bank’s pessimistic GDP growth forecast, rate pause put ball in Narendra Modi govt’s court
5 years, 1 month ago

RBI policy: Central bank’s pessimistic GDP growth forecast, rate pause put ball in Narendra Modi govt’s court

Firstpost  

The big takeaway from the RBI monetary policy announced today is the fact that the central bank’s monetary policy committee is not yet ready to lower its guard on inflation and wants the government to do its bit to revive growth. Even then, the Reserve Bank of India has clearly acknowledged the severity of the growth scenario by lowering the …

Opinion | An easy surrender of the country’s economic defences
5 years, 4 months ago

Opinion | An easy surrender of the country’s economic defences

Live Mint  

The global economy is admittedly in a strange place and even the usually reliable experts are struggling to decode an evolving economy and the central bank’s place in it. To address this new normal, we are conducting a public review of our monetary policy strategy, tools, and communications.” Coincidentally, the same day Lawrence Summers and Anna Stansbury published a Project …

Opinion | Scrap RBI’s monetary policy panel or give it a dual mandate
5 years, 6 months ago

Opinion | Scrap RBI’s monetary policy panel or give it a dual mandate

Live Mint  

Former chief economic adviser Arvind Subramanian’s research paper on gross domestic product estimation has been widely criticized on two grounds: one relates to methodology, the other relates to the “smell” test. The MPC’s irrelevance emanates from three realities, all peculiarly Indian: one, it was set up at a time when demonetization made the Reserve Bank of India seem like a …

Opinion | RBI, the world’s model central bank? Just maybe
5 years, 7 months ago

Opinion | RBI, the world’s model central bank? Just maybe

Live Mint  

India is becoming the gold standard for monetary policy in Asia, if not the world. While global markets are giddy from hints that the Federal Reserve may cut interest rates, India’s central bank has been easing since February. Passive inflation and the central bank’s full tank of gas make the case to cut even stronger. Thursday’s quarter-point reduction in the …

Opinion | RBI, the world’s model central bank? Just maybe
5 years, 7 months ago

Opinion | RBI, the world’s model central bank? Just maybe

Live Mint  

India is becoming the gold standard for monetary policy in Asia, if not the world. While global markets are giddy from hints that the Federal Reserve may cut interest rates, India’s central bank has been easing since February. Passive inflation and the central bank’s full tank of gas make the case to cut even stronger. Thursday's quarter-point reduction in the …

Opinion | RBI’s cut goes beyond a political narrative
5 years, 11 months ago

Opinion | RBI’s cut goes beyond a political narrative

Live Mint  

Monetary policy is usually formulated under the shadow of various influences. Multiple shadows have cast a pall over Shaktikanta Das’s maiden monetary policy as Reserve Bank of India governor and the Indian central bank’s sixth and last one for 2018-19. The shadow of imminent elections looms largest over the political economy, especially after the interim budget’s unabashed display of courtship …

Opinion | The whys and what ifs of central bank autonomy
5 years, 11 months ago

Opinion | The whys and what ifs of central bank autonomy

Live Mint  

Why should central banks be autonomous and what are the consequences of the government infringing on such autonomy? For example, voters elect a government to create more jobs, but the central bank can keep interest rates high to stifle investment and, consequently, job creation. India’s history since Independence is one of high state and central government deficits, a weak banking …

RBI accountable to govt, differences must be resolved internally in country’s interest: Bimal Jalan
6 years ago

RBI accountable to govt, differences must be resolved internally in country’s interest: Bimal Jalan

Firstpost  

The government also wants the RBI to release more liquidity to the shadow banking sector and relax its provisioning norms for banks. New Delhi: The Reserve Bank of India is accountable to the government and should make policies within the framework set by the government, according to a former central bank chief now heading a panel tasked with framing guidelines …

Much ado about nothing: Demystifying the needless hue and cry over the RBI
6 years ago

Much ado about nothing: Demystifying the needless hue and cry over the RBI

Op India  

“The only function of economic forecasting is to make astrology look respectable,” remarked the legendary Economist John Kenneth Galbraith. Whoever in Congress thought of RBI autonomy and role in influencing election outcome doesn’t have enough knowledge to even make credible sounding arguments. According to the RBI Act’s Section 7, “the central government may from time to time give such directions …

Opinion | Finding the right balance at the central bank
6 years ago

Opinion | Finding the right balance at the central bank

Live Mint  

The regrettable mechanics of the recent change of guard at the Reserve Bank of India raises some important questions, some long overdue, about the institution’s accountability, transparency and autonomy, and the relevance of having a governor with a strong backbone. The new approach internalised that the adoption of modern monetary management in India also favoured individuals with strong macroeconomics- or …

Facts, No Fiction: There’s a new sheriff in RBI
6 years, 1 month ago

Facts, No Fiction: There’s a new sheriff in RBI

Op India  

This week has been a roller coaster ride, from high profile extradition cases, the resignation of the RBI governor and the results of recent assembly elections. That being said, it is well acknowledged that India has one of the tightest of monetary policies and that too at a time where inflation seems to be significantly lower than even RBI’s estimates. …

Demonetisation threw up political, economic puzzles: Arvind Subramanian
6 years, 1 month ago

Demonetisation threw up political, economic puzzles: Arvind Subramanian

The Quint  

New Delhi, Dec 9 Drawing the link between demonetisation and GDP numbers, former Chief Economic Advisor Arvind Subramanian has said the puzzle thrown up by the note ban has a dual aspect - whether its impact as seen in the GDP numbers reflects a resilient economy, and if the growth figures pose questions about the official data collection process itself. …

A valid pause: on RBI holding rates
6 years, 1 month ago

A valid pause: on RBI holding rates

The Hindu  

The Reserve Bank of India’s decision to leave interest rates unchanged, given easing inflation and the slowdown in economic momentum, was both expected and reasonable. In fact, the RBI was prompted to sharply lower its projection for price gains after an unexpected softening in food inflation and a collapse in oil prices in a surprisingly short span of time — …

Government to run power play at next RBI board meeting on 14 December; tensions likely to re-surface
6 years, 1 month ago

Government to run power play at next RBI board meeting on 14 December; tensions likely to re-surface

Firstpost  

Like the government, most board members feel that RBI should be “more transparent and accountable” for its decisions Mumbai/ New Delhi: For all the cordiality on show at the end of Reserve Bank of India’s last board meeting, tensions could re-surface when it next gathers on 14 December as the government aims to ramp up pressure for changes in the …

Opinion | RBI vs govt: This truce is a defeat for central bank
6 years, 1 month ago

Opinion | RBI vs govt: This truce is a defeat for central bank

Live Mint  

Many of us will have breathed a sigh of relief as, after a marathon eight-hour meeting on Monday, it looked like India’s government and its central bank had finally made peace with each other after weeks of very public sniping. The RBI’s board, which contains several government nominees, agreed to set up a committee to examine the bank’s reserves, one …

RBI complains too much; its role has been better defined, powers expanded over four years of Narendra Modi govt
6 years, 1 month ago

RBI complains too much; its role has been better defined, powers expanded over four years of Narendra Modi govt

Firstpost  

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 …

Government, RBI must work together, end turf war
6 years, 1 month ago

Government, RBI must work together, end turf war

Deccan Chronicle  

The ostentatious turf battle between the Union finance ministry and the Reserve Bank of India is not the real issue. As India still reels under the socialist module of controlling economic activities, which the present government perpetuates, the public sector banks are pushed and prodded to finance government schemes, whether it be infrastructure projects, agriculture loans and loan waivers, start-up …

Opinion | Revisiting accountability at Reserve Bank of India
6 years, 2 months ago

Opinion | Revisiting accountability at Reserve Bank of India

Live Mint  

“The most independent central bank is not likely to be a socially optimal central bank,” economists Guy Debelle and Stanley Fischer wrote in a paper titled How independent should a central bank be?Fischer is a former vice chairman of the US Federal Reserve and was professor of economics at Massachusetts Institute of Technology when the paper was written in 1994. …

Govt-RBI rift: Bone of contention between the two is central bank's insistence on price stability
6 years, 2 months ago

Govt-RBI rift: Bone of contention between the two is central bank's insistence on price stability

Firstpost  

Through an agreement signed between the RBI and Government of India as on 20 February 2015, RBI decided to adopt a ‘modern monetary policy framework’ with the objective to ‘primarily maintain price stability, while keeping in mind the objective of growth.’ The battle between a country’s government and its central bank is neither new nor unique. Through an agreement signed …

RBI autonomy: Bimal Jalan says it’s central bank’s job to implement govt policy, governor should quit if differences cannot be resolved
6 years, 2 months ago

RBI autonomy: Bimal Jalan says it’s central bank’s job to implement govt policy, governor should quit if differences cannot be resolved

Firstpost  

The sharply depreciating rupee amidst rising global oil prices and the massive foreign funds outflow from the capital market are not crises If there are irreconcilable differences of opinion between the government and the regulator, then ‘whoever is heading the agency should step down,’ said Bimal Jalan, former governor to RBI to Mint. The sharply depreciating rupee amidst rising global …

Opinion | Can RBI, other central banks survive the age of populism?
6 years, 2 months ago

Opinion | Can RBI, other central banks survive the age of populism?

Live Mint  

Is central bank independence the next casualty of the age of populism? The government wants the central bank to loosen lending restrictions — to fuel economic activity and jobs growth — and turn over more of its cash reserves, presumably to fund populist spending ahead of next year’s elections. Meanwhile, in Europe, the populists who have seized power in Italy …

RBI-govt spat: International Monetary Fund against interference that compromises central bank's independence
6 years, 2 months ago

RBI-govt spat: International Monetary Fund against interference that compromises central bank's independence

Firstpost  

The standoff was in relation to RBI’s handling of weak public sector banks, tight liquidity in the market and ways of resolving bad loans in the power sector. I’ve said this before standing here that we support clear lines of responsibility and accountability… And, international best practice is that there should be no government or industry interference that compromises the …

Opinion | RBI’s independence needs to be protected
6 years, 2 months ago

Opinion | RBI’s independence needs to be protected

Live Mint  

The relationship between the government and the Reserve Bank of India used to be cooperative and productive, but has vitiated over the past decade. Public airing of differences must be eschewed and the government must take steps to strengthen RBI’s independence. He also warned that governments that do not respect central bank independence will sooner or later incur the wrath …

Opinion | The ball was always in the government’s court
6 years, 2 months ago

Opinion | The ball was always in the government’s court

Live Mint  

Amid speculation that Reserve Bank of India governor Urjit Patel might quit, the government did well on Wednesday to issue a statement, highlighting that the autonomy of the central bank is essential. Section 7 of the RBI Act says that “The Central government may from time to time give such directions to the bank as it may, after consultation with …

Amid Spat Between Govt & Central Bank, Focus Returns on RBI Board
6 years, 2 months ago

Amid Spat Between Govt & Central Bank, Focus Returns on RBI Board

The Quint  

But the role of the central board, in theory, is very different from what it has been in practice. The board has been a consultative body rather than a decision making one, said the person quoted above while adding that the board, if it chooses, is fully empowered to make decisions. Issues ranging from the flow of credit to small …

Public Airing Of Rift Between RBI, Govt Must Stop: Rakesh Mohan
6 years, 2 months ago

Public Airing Of Rift Between RBI, Govt Must Stop: Rakesh Mohan

The Quint  

Public sparring between the central government and the central bank is not healthy for an economy like India, cautioned former Reserve Bank of India Deputy Governor Rakesh Mohan. “I do hope that saner heads will prevail.” On Friday, RBI Deputy Governor Viral Acharya, in a public speech, aired concerns over some of the ways in which the government could impinge …

The RBI Shouldn’t Mix ‘Autonomy’ With the ‘Scope’ of Its Mandate
6 years, 2 months ago

The RBI Shouldn’t Mix ‘Autonomy’ With the ‘Scope’ of Its Mandate

The Quint  

Let’s take the proposition further. If, indeed, technocrats are more capable of taking long-term decisions, why leave fiscal policy in the hands of elected representatives? The reason that fiscal policy has not been delegated to technocrats is that it has multiple welfare and distributional effects that are best-weighed by elected representatives. Monetary policy, with its focus on inflation, is believed …

RBI vs Narendra Modi government: Public spat won’t help, but India’s best bet is not to mess with its central bank
6 years, 2 months ago

RBI vs Narendra Modi government: Public spat won’t help, but India’s best bet is not to mess with its central bank

Firstpost  

Almost every RBI governor, be it Y V Reddy or D Subbarao, have pitched for central bank autonomy in public forums inviting the wrath of the government of the day. The turf war between the Reserve Bank of India and the Narendra Modi government on the subject of the central bank’s autonomy is out in the open and is turning …

Why RBI is at loggerheads with the government
6 years, 2 months ago

Why RBI is at loggerheads with the government

Live Mint  

A growing rift between India’s central bank and the government has been many months in the making. In the latest move, the Reserve Bank of India made its disagreement with authorities public in a hard-hitting speech by Deputy Governor Viral Acharya on Friday — which he said had the backing of Governor Urjit Patel — defending the central bank’s independence. …

Viral Acharya is right; RBI should be left alone to do its job, not coerced for political reasons
6 years, 2 months ago

Viral Acharya is right; RBI should be left alone to do its job, not coerced for political reasons

Firstpost  

The most recent debate has been on the independence of the central bank. Next, on the issue of control of public sector banks, the central bank is unable to do what it has done for private banks especially on governance issues as this is where the problem is founded. Also, in the past, when some private banks were down under, …

Opinion | Undercutting the RBI will not end well
6 years, 2 months ago

Opinion | Undercutting the RBI will not end well

Live Mint  

Time was when capital markets put a premium on “strong men”. Things must have got serious because RBI deputy governor Viral Acharya used two successive public speeches to communicate RBI’s discomfort with the government’s repeated attempts to undermine the central bank. It is true that the RBI’s ledger has many red marks and there are many things that the central …

Signs of policy struggle between RBI and govt
6 years, 2 months ago

Signs of policy struggle between RBI and govt

Live Mint  

Mumbai: In a sign of a mounting policy struggle between the Reserve Bank of India and the government, a top bank official warned on Friday that undermining a central bank’s independence could be “potentially catastrophic”. “Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue …

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