IMF calls for RBI’s independence

IMF Director of Communications Gerry Rice said they are monitoring the development in India with regard to the reported rift between the Reserve Bank of India (RBI) and the Centre.

The International Monetary Fund (IMF) has called for the autonomy of Reserve Bank of India (RBI). The international institute said as an international practice there should be no government or industry interference that compromises the independence of the central bank and financial supervisor.
 
It expressed its opposition to any move that compromises with the independence of central banks anywhere in the world.
 
IMF Director of Communications Gerry Rice said they are monitoring the development in India with regard to the reported rift between the Reserve Bank of India (RBI) and the Centre. 
 
“We’re monitoring the development on that issue and will continue to do so,” IMF Director of Communications Gerry Rice was quoted as saying. “Just stepping back, as a general principal, and we’ve said this before. I’ve said this before standing here that we support clear lines of responsibility and accountability... And, international best practice is that there should be no government or industry interference that compromises the independence of the central bank and financial supervisor.”
 
She said, “We regard it as such and we have to make that statement in the context of a number of countries. So, I think that’s probably the best response I can give you.”
 
RBI deputy governor Viral Acharya, last week, had called for preserving the RBI’s autonomy, which led to the eruption of war of words between the central bank and the finance ministry.
 
Finance Minister Arun Jaitley, on Tuesday this week, accused the central bank for failing to stop a lending spree between 2008-2014 that left banks with huge bad debts, which is being seen as a fuel to the fire.
 
The Ministry of Finance in an official note on Tuesday, "Governments in India have nurtured and respected this." It observed both the government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy. 
 
"For the purpose, extensive consultations on several issues take place between the government and the RBI from time to time. This is equally true of all other regulators. Government of India has never made public the subject matter of those consultations," said the note and added, "Only the final decisions taken are communicated. The government, through these consultations, places its assessment on issues and suggests possible solutions. The government will continue to do so."
 
The RBI has been pushing for more powers to clean up the banking system, which is saddled with bad debts. In his speech on October 26, Acharya had defended the central bank’s independence, saying its autonomy would be strengthened by having regulatory control over state-run banks.
 
Media reports say RBI is not very happy with the government’s appointed directors pressing for more liberal view on interest rates for micro, small and medium enterprises (MSMEs).
 
Source: Media reports

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