RAGHURAM RAJAN
Governor, Reserve Bank of India
We are examining the new version of the Indian Financial Code and we will offer out views on it. Without examining the details, I do not want to comment. But it seems the direction indeed (on the report) is in the right direction. We never said that there should not be any process by which RBI decisions can be appealed. But we were worried about excessive oversight, trying to second-guess regulatory decisions as well as policy decisions.
C RANGARAJAN
I think that mandating the RBI governor to limit Consumer Price Index-based inflation in a certain zone and not giving RBI a majority in the committee are inconsistent. If there is an RBI majority in the committee, there is no question of a veto. In any MPC, a majority of members should be chosen by RBI. RBI will have difficulty in keeping its accountability to keep inflation within a zone if it does not have a majority in the committee.
*PMEAC stands for Prime Minister's Economic Advisory Council
USHA THORAT
Former deputy governor, RBI
There is no doubt many aspects of the law in India relating to the financial sector need change. For example, to make an MPC as a decision-making body; consolidating the various laws relating to banks; the law to resolve banks; legislation for consumer protection. At the same time, in many issues such as systemic risk, payment systems, capital flows, regulation of forex, money and government securities markets, there is a need for continuing with what has worked for us, while being open to change. As the country moves to lower inflation on a sustained basis, in line with global inflation, many of the current regulations, for example, on capital flows, might not be needed to the same extent. I think the draft Indian Financial Code is trying to make a wholesale change which challenges the existing structure in its entirety. I am not sure this is the optimal approach for making changes in law.
Governor, Reserve Bank of India
We are examining the new version of the Indian Financial Code and we will offer out views on it. Without examining the details, I do not want to comment. But it seems the direction indeed (on the report) is in the right direction. We never said that there should not be any process by which RBI decisions can be appealed. But we were worried about excessive oversight, trying to second-guess regulatory decisions as well as policy decisions.
C RANGARAJAN
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Former governor, RBI & former chairman, PMEAC*
I think that mandating the RBI governor to limit Consumer Price Index-based inflation in a certain zone and not giving RBI a majority in the committee are inconsistent. If there is an RBI majority in the committee, there is no question of a veto. In any MPC, a majority of members should be chosen by RBI. RBI will have difficulty in keeping its accountability to keep inflation within a zone if it does not have a majority in the committee.
*PMEAC stands for Prime Minister's Economic Advisory Council
USHA THORAT
Former deputy governor, RBI
There is no doubt many aspects of the law in India relating to the financial sector need change. For example, to make an MPC as a decision-making body; consolidating the various laws relating to banks; the law to resolve banks; legislation for consumer protection. At the same time, in many issues such as systemic risk, payment systems, capital flows, regulation of forex, money and government securities markets, there is a need for continuing with what has worked for us, while being open to change. As the country moves to lower inflation on a sustained basis, in line with global inflation, many of the current regulations, for example, on capital flows, might not be needed to the same extent. I think the draft Indian Financial Code is trying to make a wholesale change which challenges the existing structure in its entirety. I am not sure this is the optimal approach for making changes in law.