With reference to TCA Srinivasa-Raghavan's article "RBI - a fly in the bottle" (August 7), the writer indicated in the sub-title that the Reserve Bank of India (RBI) should never be independent. But he only discusses the past when the RBI was always dependent on the Ministry of Finance. He has not dwelt on the theoretical point about its future as to why it cannot be given independence. Had he done so, he would have to tread upon the now crucial issue and the controversy about whether the RBI governor should have the veto power in the committee or not. The constitution of the committee can be done in a way that the government nominees can always outvote the RBI's views. In such a situation, mere majority is meaningless but only veto power is crucial. The lack of veto power will limit the fly in the bottle to move only in a particular direction even inside the bottle.
In plain terms, giving up the metaphor, even within the limit laid down by the government, the power of the governor will be limited. Specifically speaking, determining the interest rate in view of inflation and growth was always been taken as he primary function and in the jurisdiction of the RBI. Now if that goes to a majority which is more in the hands of the finance ministry, then the corporates can have a field day through influence, which have never worked with the RBI in the past. Considering the ever bulging non-performing assets in the banks, such manipulation of interest rates making it easier for the corporates to take loan is a dangerous move. I believe that the veto power of the RBI governor should be there. And the mere fact that the present RBI governor, Raghuraman Rajan, has agreed to part with the veto power is irrelevant. It is relevant only as an opinion of the present incumbent. Such issues are of permanent importance and cannot be left to the determined by one incumbent's view.
Sukumar Mukhopadhyay New Delhi
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