Chinmaya IAS Academy – Current Affairs Chinmaya IAS Academy – Current Affairs
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‘Board’s objective is to protect institution, not to serve others’ interests’ Amid mounting tension between the Reserve Bank and the Finance Ministry, former RBI Governor Raghuram Rajan has said the central bank was like a seat belt in a car, without which accidents could happen. Pitching for respect for the institutional autonomy of the RBI, he said the central bank had the liberty to say ‘no’ if the government pushes it to be lenient. Ahead of the November 19 meeting of RBI Board, he said the objective of the board was to protect the institution and not serve others’ interests. “The RBI is something like a seat belt. As a driver, the driver being the government, it has the possibility of not putting on a seat belt but of course if you do not put on your seat belt you get into an accident and the accident can be quite severe,” he told a TV channel. Historically, the relationship between the RBI and the government has been precisely this — the government wants to focus on improving growth and it does all it can within the limits set by the RBI which are based on financial stability. “So, the government will push, will try and get the RBI to be more lenient,” he said, adding the central bank would examine them in close details and in reference to risks to financial stability. “We [RBI] have responsibility for financial stability and therefore we have an authority to say no,” he said. “The government can keep asking and say please consider this, please consider that but at some point, it says ‘okay I respect your decision, you are the financial stability regulator and I back off.’” “Once you have appointed these Deputy Governors and Governor, you have to listen to them because that is what you have appointed them for, they are your safety belt,” he said.
