Former Reserve Bank Deputy Governor Usha Thorat today said any consultation between the Government and RBI should not be construed as an infringement on the latter’s autonomy.
“It is categorically stated that the government fully respects the independence and autonomy of RBI. Consultation between the government and RBI, mandated by law or as evolved by practise, should not be taken as an infringement of autonomy of the Reserve Bank,” she said.
Thorat was speaking on the topic, ‘RBI and its autonomy’, at an event here.
She was referring to an instance, post demonetisation, wherein a section of RBI employees had written to Governor Urjit Patel expressing concern over appointment of a Joint Secretary-rank officer by the finance ministry to co-ordinate the apex bank’s currency chest operation.
In the letter written in January, the employees termed the appointment as a “blatant encroachment” on the RBI’s exclusive turf of currency management.
Thorat said the RBI is a full service central bank which plays several roles – it is a monetary authority, banking regulator, operates FEMA, regulates capital flows, manages public debt and regulates payment system.
“Hence, the issue of independence (of the RBI) needs to be discussed in respect of each of these roles and also from the overall angle of political, financial and operational independence.” Thorat said in the case of public debt management there can be no independence because there is always going to be a close co-ordination between the RBI and ministry of finance.
“This co-ordination is necessary to ensure the large fiscal deficits were financed in an orderly manner without too much upward pressure on interest rates and without compromising the price stability objective.” Thorat said the process of appointment of the Governor and Deputy Governors has changed now. Bureaucrats are now being involved in the selection of the Governor, the Deputy Governor and the Monetary Policy Committee members.
She said there is a scope of increasing the tenure of the Governor and the Deputy Governors to five years from the present three.