Letters: RBI not independent

With reference to “I would have resigned if overruled on demonetisation: Reddy” (January 14), the statement of former Reserve Bank of India (RBI) Governor Y V Reddy on the autonomy of the central bank cannot be supported when subjected to logical scrutiny. Talking vaguely and even emotionally (“I would have admitted myself in hospital”) does not match the RBI’s powers. He says “currency is our domain”. Next he says he would have told the government that demonetisation was its call and “the RBI has to implement”. That is exactly what the government has done by deciding to resort to demonetisation (obviously with the knowledge of the governor) and asking him to implement it. So what is Reddy’s grievance? Where is the breach of autonomy? Another former RBI Governor, D Subbarao, has written in Business Standard supporting demonetisation in great length. So it is just a difference of opinion and there is nothing to be so worked up about it as to get admitted in hospital.

Reddy must remember that the RBI has autonomy and not independence. RBI can work independently within the framework of the monetary policy committee (MPC) where the governor has his final say if there is a tie. When the MPC was being worked out, an issue was raised about interference by the government. And who wanted the MPC? Urjit Patel and Raghuram Rajan himself. So interference by the government in the powers of RBI has a long and chequered history. It is unfair to raise the issue now at the time of demonetisation. It gives the wrong impression that demonetisation is an affront to the jurisdiction of the RBI. It is not.

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