Autonomy is fine but the Reserve Bank of India (RBI) must be held more accountable. However, accountability does not mean the government pressurising the central bank to dilute the regulatory and capital norms just before the general elections. Accountability is also is not forcing the RBI to part with a major part of its reserves so that the government can use them to reduce the fiscal deficit. Attempts to take away the regulatory powers of the central bank over payment systems do not constitute accountability; nor does an RBI board packed with government appointees and political activists pushing the government’s agenda without pausing to think of its consequences.
Accountability means greater parliamentary scrutiny of the RBI’s policies and regulations and its impact on the banking system specifically, and the economy as a whole. It implies better informed and non-partisan parliamentary committees asking better-researched and searching questions to the central bank. The Monetary Policy Committee is doing a good job in setting interest rates and is transparent. The Financial Stability and Development Council (FSDC) should be the appropriate body to look into the financial stability aspects if the government of the day does not lean on it too strongly. Accountability of the RBI must be institutionalised rather than have the government of the day constantly say that it has the popular mandate while the latter does not and hence must bend whenever required to do so. The RBI on its part must communicate more so that the rationale of its policies and regulations are understood by the public. Issues on which there are differences between the government and the RBI must be discussed objectively in the public domain and not be kept confidential. This will also lead to greater public accountability.
Arun Pasricha, New Delhi
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