‘Can the Reserve Bank of India stand up to the Finance Minister,’ was the question raised recently in the media. This is a misleading question. The RBI is expected to provide expert advice to the Government, in compliance with the provisions of the RBI Act, 1934. Acceptance or rejection of such advice is the latter’s prerogative.......
- K.Sivaraman, Retired Chief General Manager of Reserve Bank of India
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2 comments:
Shri Sivaraman's statement is indisputable. The point which is being raised is whether RBI would be able to maintain its stance of monetary policy( say, in terms of increase or reduction of interest rates) if the FM did not share its view and presses the Governor to follow his advice. The present Governor has been maintaining the independence of RBI in this respect to a great extent. All Governors would be able to maintain the fierce independence of the Institution if they were also given the same protection afforded to CAG,CVC in that they cannot be removed till their tenure is over and the tenure is not less than 5 years or better six years as in the case of the Chairman of the Federal Reserve system of USA.
A. Chandramouliswaran.
As space is limited, I will comment only on NIM. The net interest margins enjoyed by some banks are much higher than the average deposit interest rates in certain countries from where we cut and paste policy formulations. But this is not peculiar to banks. Margins enjoyed by industries and service sectors are also not amenable to any discipline. The huge margins of profit enjoyed by Pharmaceutical industry as also IT and electronic sectors affect the common man. The scenario is worse when it comes to agriculture, agricultural produce and processing industry.Government should state the policy about costs and margins as also prices and wages. More often those responsible for policy formulation take shelter under technical terms like inflation, impact of recession abroad and so on. If corporates are sitting on huge cash piles or the net-worth and number of billionaires are rising when overall standard of living is going down and hunger and poverty are increasing, it is time to wake up.M G Warrier
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