In a strong pitch to make RBI more accountable, former Governor D Subbarao has said there is "insufficient" mechanism to ensure accountability on part of such a powerful institution whose policies affect people's everyday lives.
"There is no mechanism for an institution as powerful as Reserve Bank to render accountability," Subbarao, who was at the helm from 2008 to 2013, said.
He noted that RBI makes policy that affects people's everyday lives, including prices one pays in the market, the interest one earns in savings bank account and EMI on housing mortgage.
"But the Governor of Reserve Bank is not elected. Deputy Governors of Reserve Bank are not elected...They are technocrats. In democracy, these technocrats are wielding enormous power to influence people's everyday lives.
"The question is: are we rendering accountability? are we rendering accountability sufficiently?, he asked.
The former RBI Governor was speaking on the theme 'Leading Reserve Bank of India: Challenges & Opportunities' while delivering the eighth B L Maheshwari Memorial Lecture at the Centre for Organisation Development last night.
Subbarao has been one of the most respected RBI Governors as he is credited for putting in place explicit safeguards for the Indian financial system in view of global financial crisis.
He said there are procedures in RBI for rendering accountability, noting that Parliament's Standing Committees can summon the Governor for evidence on specific issues, and RBI itself holding seminars in different institutions to explain its policies.
"But these are either voluntary or insufficient mechanisms for rendering accountability," he said.
In America for example, the chairman of Federal Reserve goes before the Congress, and these proceedings are telecast on national television. "That's the way of rendering accountability. In the Reserve Bank in India, we don't have a similar system for rendering accountability", he said.
Subbarao said he is not suggesting by any means that RBI's policies are arbitrary or they have no economic rationale.
"There is no mechanisms for an institution as powerful as Reserve Bank to render accountability". (More) PTI RS
"How can low middle income households in the country demand accountability from Reserve Bank unless they know what Reserve Bank does and how it affects their lives.
"So, it's the responsibility of the Reserve Bank to explain to the people, to demystify Reserve Bank so that people understand the connection between what Reserve Bank does and how it translates into their lives," Subbarao said.
"It's very important for a Governor, top management and any professional in the Reserve Bank to be sensitive to this challenge of rendering accountability, particularly about inflation", he said.
