Letter to BS: RBI should be responsive to changes in the financial system

This refers to “Staffers expect Das to bring old RBI back” (December 18). The reference to lateral entries during the time of former Reserve Bank of India (RBI) governors Raghuram Rajan and Urjit Patel must be put in perspective. It wasn’t as if there were large-scale lateral inductions into the RBI during the tenure of these two. Many economists and other senior officers of the RBI have had short stints with the private sector and international organisations. Lateral induction of well-qualified persons, done in a transparent manner, is beneficial.

It is also not as if the relation between the government and the RBI was always harmonious when civil servants were appointed as governors in the past. The fractious nature of the relationship of former governors Y V Reddy and D Subbarao with then finance minister P Chidambaram are well known. The tension in these cases extended to relations between the then North Block mandarins and senior RBI officials. The report mentions that the employees want the new governor to restore the old culture at the RBI. The RBI, like other central banks, is evolving and has to be nimble and responsive to changes in the domestic financial system and the global markets. Harking back to the old ways would be unreal.

 

There have always been attempts by successive governments to lean on the RBI for various issues and the RBI has quite often differed and put across its views strongly. They have worked together harmoniously while having differences on many issues. This is natural given the divergent objectives of governments and central banks across the world.

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Arun Pasricha, New Delhi

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