The Debate on RBI’s Autonomy

It is somewhat of a relief to know the finance ministry stating Saturday that the govt. respects the independence & autonomy of the Reserve Bank of India.

The demonetization drive has thrown up concerns on the RBI’s autonomy being under question. Besides many other factions, two of its former governors, Y.V. Reddy (governor from 06-09-2003 to 05-09-2008) and Bimal Jalan (22-11-1997 to 06-09-2003), have also expressed concerns, with the former even going on to say he would have quit his post if the govt. might not have heeded to his opinion against this drive.

The deliberation on the central bank’s autonomy is almost as old as the bank itself. But then, what’s so special this time round? The govt. asked the bank to decide on the demonetization move and it didn’t waste any time in bowing acknowledgement to the move. Now, is this something out of the ordinary or the purviews of the central bank?

The base question remains the same – was demonetization really required in ‘public interest’?

There are many factions who feel that is not the case. If not, these people feel that the RBI should have put up at least some sort of resistance to the move, if nothing much else.

But on the other hand many feel that both the bank and the govt. felt the move was for the greater benefit of society at large – if not immediately – then definitely in the long haul.

The point is – had the RBI shown a semblance of this, the public would have felt convinced on this aspect. Notwithstanding anything, only time would tell who is right and who is wrong.


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