P S Rao’s article (“NABARD and RBI: A 30-Year Legacy Being Upturned”, EPW, 22 September 2012) has indeed made a strong case for the Government of India (GOI) not going forward with the amendments proposed by the National Bank for Agriculture and Rural Development (Amendment) Bill, 2012 that would have the effect of eliminating, in one way or the other, the financial and operational links between the Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) and subverting the autonomy of NABARD’s board of directors by making its decisions subject to GOI approval.............
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GOI, particularly Ministry of Finance, has been in the recent past, showing a tendency to treat various regulatory and supervisory organisations which were constituted under independent statutes, as government departments. The tone and tenor of observations to the media and elsewhere by spokespersons of Finance Ministry point to this disturbing pattern of behavior. Allowing functional autonomy is essential for vibrant growth of institutional structure especially in the financial sector. A very healthy practice of mutual consultations, as in the case of GOI and RBI (Governor and FM meet before and where necessary after every review of monetary policy and budget formulation) has been ensuring avoidance of conflict in policy directions during the last six decades. The assertion of ‘ownership rights’ by GOI is of recent origin and the latest tendency to formalize this approach via legislative measures as in the case of NABARD will weaken the institutional system.
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