In a new twist to the controversial proposal to strip the Reserve Bank of India governor of his veto power in interest rate decisions, an FSLRC member has said the draft bill does not reflect the views of the panel.
Financial Sector Legislative Reforms Commission (FSLRC) member M Govinda Rao revealed on Sunday that the commission actually favoured governor having the last word.
The revised draft of the Indian Financial Code (IFC), which proposes that any decision on monetary decision should be taken by majority by a seven-member committee without any veto power to the RBI chief, has been seen as an attempt to curtail the central bank’s autonomy.
This prompted the government to claim the draft IFC was not a “report of the government or of the finance ministry” and was based on the FSLRC report.
“There is a misconception that the revised draft of IFC is a report of FSLRC,” Govinda Rao said. “But that is not true. The term of the FSLRC ended in 2013.” He said the commission had been of the view that the RBI governor should indeed have a “veto power” in the monetary policy.
The revised draft IFC released last month for public opinion has suggested doing away with this veto power and wants the seven-member MPC to take decisions by a majority vote.
Following an uproar, finance minister Arun Jaitley had said, “FSLRC has made its recommendations, which have been made public for comments. After the comments are received, only then will the government take a view.”
Chief economic adviser Arvind Subramanian also said, “FSLRC report is a report of FSLRC. It is not the report of the government or the finance ministry. The report is not the view of the government.”