Indian govt respects central bank's autonomy, says finance ministry amid row

PTI New Delhi, India Jan 14, 2017, 12.37 PM(IST)

An RBI union and three former governors ? Manmohan Singh, Bimal Jalan and Y V Reddy ? have flagged concerns about the central bank's functioning. Photograph:( AFP )

The Indian government has refuted allegations of interference in the functioning of the country's central bank, the Reserve Bank of India, stating it fully respects the independence and autonomy of the RBI. 

The finance ministry was responding to allegations of an RBI union which accused it of infinging on the central bank's autonomy by appointing an official for currency coordination, PTI reported.

"Consultations between the government and RBI are undertaken on various matters of public importance wherever such consultation is mandated by law or has evolved as a practice. Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI," the finance ministry said in a statement.

"It is categorically stated that the government fully respects independence and autonomy of the Reserve Bank of India," the ministry said.

In a letter to RBI Governor Urjit Patel, the United Forum of Reserve Bank Officers and Employees had stated that employees were feeling "humiliated" by events since demonetisation because of "blatant encroachment" on RBI’s exclusive jurisdiction on currency management.

The letter also said the RBI's autonomy and image have been “dented beyond repair".

The union raised the issue after at least three former governors  —  Manmohan Singh (former prime minister), Bimal Jalan and Y V Reddy  —  flagged concerns about the central bank's functioning. Former deputy governors, including Usha Thorat and K C Chakrabarty too have voiced their worries.

"An image of efficiency and independence that RBI assiduously built up over decades by the strenuous efforts of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained," the employees said in the letter.

The letter said the RBI staff has carried out its job excellently after the move to ban 87 per cent of the outstanding currency by the government.

(WION with inputs from PTI)