The word “balancing” seems to be a favourite of Reserve Bank of India Governor D Subbarao. Consider the number of times he has used the expression “balancing” growth with inflation management in his monetary policy speeches. So it wasn’t a surprise when, last week, he sought to once again “balance” his views about the finance ministry’s equations with the central bank. A day after advising the ministry to demonstrate exemplary corporate governance by exercising its ownership rights through bank boards, Dr Subbarao said the RBI and the government were not adversaries, that disagreements were natural, and that he would worry if there was complete agreement. Such nuancing of views may be a compulsion of the high office he holds, but the message underlying them comes through loud and clear: North Block has no business being in the business of micro-managing banks................
1 comment:
It is often remarked that RBI does not enjoy autonomy like some other central banks, eg. German Bundesbank, as the GOI could issue written directives, under the RBI Act, to RBI to take/omit to take certain measures. In my opinion, RBI should make the GOI issue directives if the latter wish the former to take certain measures with which RBI does not agree. This would result in the GOI being compelled take responsibility for the measures taken at the instance of GOI and their consequences. I have known of instances where GOI did not permit, on political considerations, the RBI to take strong action in time against certain banks and managed to avoid the responsibility for the disastrous consequences of the advice in the absence of written directives.This should be the RBI's fist step in the movement towards dejure and defacto autonomy for the RBI.
A.Chandramouliswaran.
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