Subbarao speaks his mind on 'negative press'

Reported as being a handmaiden to the finance ministry when the central bank announced a slew of measures in the wake of the global financial turmoil, a reflective Reserve Bank of India Governor D Subbarao placed his actions in perspective at an offsite of senior insiders last week.

Some RBI officials who attended the meeting near Mumbai confirmed that the governor addressed the issue of the recent “negative press”.

To place the situation in context, Subbarao had drawn parallels from the US and UK, where central bankers worked in co-ordination with governments.

Subbarao apparently reminded the officials that coordination between government and the central bank always existed and that it was getting explicit now.

A change of guard at RBI could also have led the media to scrutinise the functioning of the central bank more closely, he apparently opined.

Subbarao moved from the finance ministry to RBI on September 5, succeeding Y V Reddy. Subbarao felt that in these extraordinary times, coordination between government and RBI becomes important, a central bank official said, refusing to elaborate further.

The weekend offsite meeting was about internal management aspects of RBI and it did not discuss any major policy steps, it is learnt. The meeting reviewed the performance of each department. Some external experts spoke on leadership and motivation. It was only on the sidelines that issues relating to inflation and growth were informally discussed, the officials said.

In the aftermath of a slew of monetary measures, some sections of the media had questioned the independence of the central bank, when it seemed that finance ministry was exerting pressure on RBI to loosen its monetary policy.

Some sections of the media had said “RBI risks losing its clothes”. Some newspapers said RBI appeared as the finance ministry’s “department of monetary policy execution”.

Some central bank watchers were particularly riled that RBI took strong monetary measures just seven days after announcing a measureless monetary policy on October 24.