Amid the rift between the Reserve Bank of India (RBI) and the Bharatiya Janata Party-led Centre, former RBI Chair Professor of Economics, IIM Bangalore and CEO of EGROW Foundation, Charan Singh said that it is just a "family issue" and should not be seen too much.
The Centre had earlier invoked Section 7 of the RBI Act, which allows it to issue directions to the central bank governor on matters of public interest.
"In America, Federal Reserve is considered as a very independent central bank, but the chief of the Fed themselves have said that we are independent within the Congress. This exactly was reflected in the Finance Minister's (Arun Jaitley) speech last Saturday, where he said that look at the end of the day elected representative have to answer the population because they go for voting very regularly and very often. Therefore, at the end of the day they are responsible for the country's economic growth," Charan told ANI.
"The other thing I would like to say is that this is a family issue - including government, which is responsible and accountable, and the other is the institution which is through the Parliament, the RBI. So, in a way, this is a day issue and should not be seen too much in it," he added.
Singh further said that having the difference of opinion and having an opportunity to share those opinions should not be considered as "dangerous or controversial".
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"In a way, it reflects transparency. As far as the independence is concerned, after the 2008 crises that took place, the concept of independence of a central bank took the back seat because in almost all the countries the government had to come and bail out the situation. The RBI came into existence by the act of 1934 and started its operation in 1935. So, central banks are new creations, governments have always been there," he added.
Singh also stated that the issues related to the Prompt Corrective Action (PCA) should be looked into the depth.
"There is nothing wrong in looking into it," he said. "In the RBI and the government relationship, there is something like the cash and debt management committee where, not at the governor's level, but at the junior officers' level. Maybe the time has come that we can start thinking in terms of a joint committee between the government and RBI which can tackle financial regulatory supervisory function of public financial enterprises," Singh added.
On Wednesday, the Finance Ministry stated that the government holds "extensive consultations with the RBI from time to time."
The Finance Ministry, in a statement, had said that the autonomy of the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. It further asserted that both the government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy.
"The autonomy for the Central Bank, within the framework of the RBI Act is an essential and accepted governance requirement. Governments in India have nurtured and respected this. Both the Government and the Central Bank have to be guided by public interest and the requirements of the Indian economy," the statement read.
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