RBI’s Governor Urjit Patel in his appearance to the Parliamentary Panel on Finance warned about the frequent interventions by non-technocrats in the affairs of central banking. The Governor asserted that monetary policy should be in the domain of technocrats or field experts.
Mr Patel also informed the Panel that autonomy of the RBI is ‘non-negotiable’.
“He told us that it is only the experts and technocrats who should have a say in the country’s monetary policy. There would be a direct conflict of interest if any other committee is given say in the matter.” –The Hindu quoted an opposition MP about Patel’s disclosure to the Parliamentary Panel.
Patel’s’ response to the House Panel comes in the context of the increased number of committees administering into central baking functions in recent years.
Starting from the Financial Sector Legislative Reform Committee and the recent Inter-Ministerial on Payment Regulation (SC Garg Panel), various committees manned by non-technocrats encroached into the functioning of the central bank. Another Committee on Economic Framework on RBI’s Capital Reserves is in the formation stage.
The Governor’s presentation on Tuesday on the impact of demonetisation and the status of NPAs, was driven by the recent conflict with the government on several issues related with central banking including the core issue of RBI’s capital reserves.
Though the Governor avoided confrontationist issues, the general theme of his presentation seems to be that he is not ready to compromise on autonomy of the central bank.
Mr Patel is neither mild as well as he started from where the Deputy Governor Viral Acharya left. Mr Acharya in his A. D. Shroff Memorial Lecture pointed out that appointing ‘non-technocrats’ and creating ‘parallel regulatory agencies’ as an instance of attack on independence of central bank.