........The relationship between the finance ministry and the banking regulator, the Reserve Bank of India (RBI), has probably been as bitter and strained as the one between the government and CAG. Unlike CAG, RBI is not a constitutional body but it enjoys a special position among all financial sector regulators and, apart from regulating banks, it is also the monetary policy authority. Yet, the finance ministry’s treatment of RBI has often given the impression that the former has little respect for the latter’s independent status. It began with the idea of setting up a new body called the Financial Stability and Development Council, which was to be chaired by the finance minister, and the RBI Governor was to head only one of the council’s sub-committees. The RBI management made no secret of its disapproval of the idea but this made no impact on the government and the new arrangement has been put in place...........
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