Recent developments related to the interest rate fixing panels do not convey anything positive. The revised draft of the Financial Code proposes the setting up of the committee while according the government the right to select the majority of its members and curbing the veto power of the Reserve Bank of India (RBI) Governor, which was available in the earlier Financial Code. Such a move would be deemed as interference in the working of the RBI and would be counterproductive in the long term. Ratings agency Moody's has conveyed a similar sentiment.
While it is understandable that a logjam in the Rajya Sabha has slowed down the reforms process initiated by the government, the latter should not make moves that put a question mark on the competency of the country's central bank. The impasse has to be resolved through political dialogue within the country's democratic framework while maintaining the independence and transparency of RBI's functioning in our financial system.
M L Kabir Kolkata
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