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| Fiddling with Autonomy of RBI | | | Omkar Dattatray
RBI is in the news not
for any good cause but for the unprecedented row and spat between the RBI Governor Urjit Patel and the centre government over monetary policy and some other issues which in fact are the domain of the RBI. The fact is that RBI governor Urjit Patel was handpicked by Modi government and entrusted the coveted job of heading RBI after non renewal of the term of Raghuram Rajan. There have been efforts in the past also to trample the independence and autonomy of this prestigious institution of the country but during the past few months there were severe attacks on the freedom and autonomy of the RBI and its operational functioning which is the prerogative of RBI. Central bank is the banker of the Centre government and is the custodian of the last resort and it frames the monetary policy of the economy and gives the direction to the economic policy as well. This highest institution of the country should have some sort of independence and operational autonomy so that it can work for the good and in the interest of the economy. This institution of the country should be allowed to operate and work as per the professional acumen of its board of directors and its governor who in the present case is an economist and professional of repute but the unfortunate spat between the central government and the RBI in recent months is a cause of concern for the economy, financial markets and even common man is also worried over the happenings in the prestigious institution of the country perpetrated by the over indulgence in the role and functioning of this institution. Earlier, Raghuram Rajan the then governor of the RBI was also made a scapegoat by the NDA government and now the economist governor Urjit Patel was made to quit office unceremoniously by the same government. Predecessor of Urjit Patel, Raghuram Rajan was made to demit office over the issue and perception of RBI role and now Urjit Patel resigned due to the spat between RBI and central government over the differences in the monetary policy committee and the quantum of reserve capital of the RBI and its strict prompt corrective action norms against banks with high NPA which according to government curtailed lending. There were some contentious issues which led to a spat of unprecedented nature and led to the exit of its governor Urjit Patel who though cited personal reasons for his resignation. The fact is that all know that he was forced to resign as he was not toeing the line of central government and wanted to maintain the operational autonomy and functioning of this top institution. Urjit Patel was once the blue eyed prince at the RBI under former governor Raghuram Rajan and he had appreciated the contribution of Urjit patel during his term as Deputy Governor of RBI which was significant opines Vaibhav Pareek. He further said, "I was optimistic that you more than anyone else could uphold the integrity of the RBI and the Indian economy because your experience is your testimony. Little did I know that an economic catastrophe was underway and it would have passed through your hands? It was demonetization………" Now the entire central bank is under the control of Urjit Patel and not a committee as earlier when Urjit Patel was the deputy governor of RBI and managed the Urjit Patel committee and braved through the crisis. Has the RBI's autonomous character and identity been sacrificed to appease the current regime! In the crisis of RBI and government, RBI board too played an over active role often pushing the government's view point. It was clear enough that due to RBI-government Logjam, Patel had two options, either to accede to the demands and to the dictates of the government or resign. It is unfortunate for the economy, financial markets and the public at large that days before the central board of RBI was to meet on December 14, embattled RBI governor decided to quit citing personal reasons. It is seen in the financial market as direct fallout of the bruising spat between the country's central bank and the government. Many politicians, economists and the other experts even went so far as to drub a key RBI board meeting on Nov, 19 a "day of reckoning" for RBI, the government and the economy. During the acrimonious run up there were no fire words or resignation threats during central banks nearly nine hours board meeting. Despite talk of demands to handover the RBI surplus reserves to the government, there were no raids on its coffers or any concrete proposal to relax lending norms for state owned banks under the prompt corrective action (PCA) framework. No separate liquidity was opened for non-banking finance companies (NBFCs) or micro, small and medium enterprises (MSMEs). The RBI clung to its position but what the meeting did achieve was an agreement to relook at some of the contentious issues. But will this truce end the spat between the RBI and central government is a million dollar question? However, the RBI governor Urjit Patel said after the meeting that all is hanky dory but in actual things did not subside but precipitated which led to the unfortunate resignation of RBI governor. The resignation of Governor Urjit Patel who was handpicked by the BJP government in Septemeber, 2016 is a major embarrassment to the government and the Prime Minister Modi and finance minister Arun Jaitely are giving statements eulogizing the contribution of Urjit Patel to the economy and RBI. It is a damage control exercise. The public attack on the institution, the current spat and the new replacements in RBI board suggest political rather than professional priorities. In fact, RBI and the Central bank were locked in a battle of words over host of issues that had a bearing on the RBI's autonomy which Urjit Patel was fond of and wanted to preserve. In fact Urjit Patel's resigniation took everyone by surprise as there was some truce made in the board meeting last month on some of the controversial issues including central banks reserves for fiscal purposes. The resignation of Urjit Patel is a clear reflection of the mind set of NDA government to work with independent economists. What has happened to this great institution is not a solitary event or a coincidence but earlier efforts were afoot to tinker the autonomy of CBI and intervene with its identity and character. Government's crusade with various autonomous institutions and RBI is also a bead of that string. NDA government seems hell bent upon attacking the independence and autonomy of the prestigious institutions of the country and RBI - government row and tinkering with CBI which is a primary investigation agency of the country is not a secret now. The BJP government broke all previous records of interfering with the functioning of RBI by trying to invoke section 7 of RBI act which gives central government powers to direct RBI to act in a specific manner. Now new governor - a career bureaucrat Shaktikanta Dass has been appointed to head RBI who is more pliant. He has given a message that government runs the country, the economy and there should be cordial relations between the two. At the same time he has expressed that operational autonomy of the central bank will be maintained while sorting out issues with all stake holders. Yashwant Sinha former finance minster has criticized government's policy towards RBI. He said autonomy and integrity of the bank is tinkered with. Subramiam Swamy of BJP has also said that exit of RBI governor is unfortunate and fall out of the spat between RBI and government. Arun Shoura has criticized government's handling of RBI and attack on its autonomy. Former PM Manmohan Singh has expressed concern over the resignation of the economist and expert governor of RBI Urjit Patel. To cut a long story short the autonomy of RBI and its operational independence should be maintained at all costs and there should be no fiddling with it. Now, it is to be seen as how the new incumbent will douse the flames of discontent between RBI and government while maintaining autonomous character and integrity of central bank. |
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