The Committee of Financial Sector Assessment (CFSA) chaired by Dr Rakesh Mohan, deputy governor, Reserve Bank of India (RBI), submitted its report with numerous recommendations on the Indian financial system, to the finance minister on Wednesday.
While the report will be released for general public on Monday, March 30, a senior official at RBI, while speaking to HT, said some of the important recommendations of the report on issues of setting up a debt management office, monetary policy committee and regulatory framework
The committee has suggested that it is not the right time to set up the public debt management office that looks after the governments borrowing programme.
“While the committee feels that there should be a separate debt management office, it feels that this is not the right time to do so and will have to be implemented going forward as it will reduce control over the fiscal deficit at this point of time,” said a senior RBI official who did not wish to be named.
The government has already set up a middle office in the Finance Ministry and subsequently a debt management office will be set up.
The official said the committee has criticised RBI for not setting up a monetary policy committee and also for lack of transparency in disclosing the minutes of technical advisory committee.
RBI has defended its stance by saying that it has already set up a technical advisory committee that advises it on the monetary policy, which anyways is not binding and the Governor has the final say on the monetary policy.
“The RBI Act will have to be amended for having a monetary policy committee that decides on the policy stance,” said the official. The committee also recommended RBI to continue with its balanced regulatory approach where it follows both the rule based and the principle based regulation in some cases.
While there were talks to move from the rule-based regulation to principle-based regulation, the global financial crisis has now forced the developed nations to move closer to the rule based regulation. This has strengthened RBIs stance of being more rule-based and to enforce principle based regulation where it seems suitable.