The Union government is actively considering according appropriate level of autonomy to the Reserve Bank of India (RBI) not just by pushing the Fiscal Responsibility and Budget Management Bill in the forthcoming winter session of Parliament, but also by seeking to carry out amendments to the Reserve Bank of India Act.
At present, the RBI finds a place in List 1 of Schedule VII of the Constitution of India "subjecting the Bank's policies to the wisdom of the executive and legislative wings of the Union".
There are only a few instances of references to autonomy of central bank in the Constitution and the government is in favour of inserting an appropriate provision in the Constitution to grant appropriate level of autonomy, according sources in the know of developments.
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The issues arising out of the continued fiscal dominance, predominance of publicly owned financial intermediaries and non-financial public enterprises and the relatively underdeveloped state of financial markets have to be addressed to grant operational autonomy to the central bank, they added.
At present, the 'joint-family' approach between the government and the RBI ignores the basic tenets of accounting principles in regard to transactions between the two and hence the integrity of their respective balance sheets gets eroded making both autonomy and accountability difficult to assess.
In a globalised scenario, with powerful corporations exerting influences outside of the executive and legislative wing of government, it is necessary to also ensure independence of central bank operations.
Recommendations relating to legal framework, particularly those relating to defining the objectives of and imparting transparency in monetary policy as recommended by the advisory groups will also be taken up in due course by the Parliament, sources added.