Monday, January 25, 2021
Home Editor's picks RBI Deputy Governor's remarks against Govt are unbecoming and betray the tradition of the...

RBI Deputy Governor’s remarks against Govt are unbecoming and betray the tradition of the institution

Viewed in this context, the Deputy Governor’s remarks reflect very poorly on the man. Firstly, the public airing of differences with the government is unprecedented. Secondly, the reference to the inherent threat to financial markets and hence the overall economy seems outlandish, to say the least.

As a former officer of the Reserve Bank of India, I was shocked to read the recent remarks of Viral Acharya, Deputy Governor of the Reserve Bank of India. There are probably no parallels or precedents to such public remarks that tantamount to threatening the government of India by a ranking leader the Bank.

The RBI, India’s Central Bank is a venerable institution that effuses dignity and reverence in the world of banking and finance, not only in India but the world over. Its rather quaintly abstruse and almost self-effacing communication style – be it in its official communiqués or while interacting with the public at large – speaks of its tradition and élan that is generally matchless. This quiet dignity actually conveys so much more than what it actually says and adds an aura of an enigma to it. For example, even a passing nod from the RBI Governor at a meeting of CEOs of banks can set tongues wagging.

Like most other Central banks, its presence is felt, rather than heard. Insiders are aware that RBI’s reticence and an unwillingness to hog the spotlight is also a calculated strategy to create space for itself. It provides enough room to manoeuvre, change course if needed, and fight its battle with the government quietly and behind closed doors. That has only earned it respect and reverence.

Given this grand setting, it was upsetting to read the speech of Viral Acharya. It is very amateurish indeed and only betrays a lack of experience in managing a large banking bureaucracy. He is certainly oblivious of the ethos and dignified traditions of a great institution that he represents. That the Deputy Governor chose to attack the central government in a public lecture has not only raised eyebrows but also raised questions of why the government has not acted on this. His continuing in office has become untenable.

The RBI and the Government of India are like inseparable Siamese twins who have to work together in the interest of the country. Like wedded partners, they have enjoyed great moments of comradery as well as intense frictions in their relationship. Over the years, both have learnt to resolve or manage the differences amongst themselves without impacting the day to day operations or the public getting wind of it.

Having said that, let’s look at the controversy itself. It has been reported that the differences arose, among other issues, over the government’s proposal to transfer approximately Rs.3.6 lakh crores of reserves to itself. This is not unseemly given that the RBI is an agent and banker to the government. Differences over the use of the reserves are legitimate and must be discussed in closed rooms and not via the media. But in all such matters, if one is guided by past experience, the government view prevails.

For all practical purposes, the RBI has been and continues to be an extension of the Ministry of Finance, the government of India. All past and current Governors and members of the Board are keenly aware that in any differences or tussles with Delhi, the Ministry of Finance has the last laugh. If despite this understanding, Viral Acharya chose to discuss differences in public, it only points to issues extraneous to the functioning of the Bank.

The reason for RBI playing second fiddle to the governments stems from the RBI Act itself. The government appoints the Governor and has the power to sack him. It also has enormous powers to instruct the RBI directly or through its board to carry out its diktats.

In fact, there have been numerous instances of this. One interesting anecdote that has done the rounds is that during bank nationalization in 1969, some in the RBI was said to have had their reservations. Apparently, Mrs Gandhi’s office called the concerned senior officers directly and ordered them to prepare the necessary paperwork for the legislation. It was done quietly without any further ado.

After Independence, the government of India had firmly established a tradition of appointing IAS officers or other Central Services officers, particularly from the Ministry of Finance as Governors. This way, it ensured a de facto control of the Bank. Of course, there have been a few notable exceptions – like Dr C.Rangarajan who was a former Deputy Governor. Hence all this talk of the Bank’s independence is purely academic and largely a creation of the media to exacerbate the tensions. RBI for its part understands this and is fully reconciled to this reality.

It is the Congress governments that take the cake for running roughshod over the RBI. Many are only keenly aware of the tenuous relationship between P.Chidambaram, the former Finance Minister and Governors of RBI, particularly Dr.Subba Rao.

The current Chairman of the US Federal Reserve, Jerome Powell is also under pressure from the Trump administration. President Trump is on record fighting against the Fed. But the Chairman, given the august traditions of the Fed, has refused to enter into a public fracas. That does not mean he has given in to Trump’s pressure. On the contrary, he has continued with his interest rate regime in a dignified manner, never engaging the President in public.

As expected, the media too has had a role in overhyping the controversy. That the issue has been repeatedly opined upon by known Modi baiters comes as no surprise.  Also the timing  – a few months before the general election – seems too much of a coincidence. But what is surprising is the amount of support they have generated in the international press.

Viewed in this context, the Deputy Governor’s remarks reflect very poorly on the man. Firstly, the public airing of differences with the government is unprecedented. Secondly, the reference to the inherent threat to financial markets and hence the overall economy seems outlandish, to say the least. It must be made clear here that the markets will continue with minimal or almost no impact if the Governor and his team are sacked.

The markets are dictated by the economic fundamentals and the overall regulatory regime that define the financial and banking infrastructure in India. These are already in place and will be hardly impacted by the individuals.  Lastly, the deputy Governor has displayed a complete lack of awareness of the ethos of the magnificent institution he represents. The markets and the executive leadership of banks in India now recognize this.

It is time for the Modi government to act decisively and bring in new blood into the RBI.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

Naagesh Padmanaban
All things considered by this ordinary citizen of the world; Calls a spade a spade.

 

Related Articles

Trending now

Prosenjit Chatterjee breaks his silence on the Netaji Subhash Chandra Bose portrait controversy: Read what Bumba Da has to say

Bengali actor Prosenjit Chatterjee has broken his silence on the nonsensical controversy over the Netaji Bose portrait.

Ashoka University Assistant Professor mocks Lord Ram while trying to troll President of India over false accusations

Neelanjan Sircar works as an Assistant Professor of Political Science at the Ashoka University and also a also at the Centre for Policy Research.

‘Naive and far from truth, just like imaginary Nehruvian utopia’: Read why veterans of Indian Armed Forces want Rahul Gandhi to apologise

Veterans of the Indian Armed Forced have condemned the recent statement by former Congress President Rahul Gandhi.

A Maulvi’s job is to teach religion, education of students is the govt’s responsibility: Himanta Biswa Sarma on madarsas

Answering to Badruddin Ajmal's allegations, Himanta Biswa Sarma stated that Hindus do not attack Mosques, it is Ajmal's own ancestors who had attacked and destroyed Hindu temples.

After getting offended over ‘Jai Shree Ram’ chants, Mamata Banerjee complains about being ‘teased’ in front of the Prime Minister

Mamata Banerjee was addressing a public rally in Hooghly's Pursura months ahead of state legislative assembly election

Jharkhand: Family of Puja Bharti, who was found dead with hands and legs tied, dismisses ‘suicide’ claims, demand CBI inquiry

Puja Bharti's father dismissed the suicide theory and questioned if it were indeed suicide, how were here hands and legs tied up.

Recently Popular

Professor who translated Rahul Gandhi’s “don’t need army if farmers are strong” speech in Erode faints after the speech: Reports

Muhammed Imran, who translated Rahul Gandhi's speech at Erode, collapsed after interpreting the speech from English to Tamil

‘I allow you housewives to have extra-marital affair with man of your choice’: Video of Mamata Banerjee’s ‘progressive’ speech goes viral

Mamata Banerjee says she is so "flexible" that she has given permission to housewives to have extra-marital affairs

Is it actor Prosenjit Chatterjee in the portrait of Netaji Subhash Chandra Bose inaugurated by President Kovind? A fact check

It was claimed that it was actor Prosenjit Chatterjee in the portrait of Netaji Subhash Chandra Bose inaugurated by President Kovind.

Groping a minor’s breast without ‘skin contact’ not sexual assault: Details of the shocking Bombay High Court verdict

The Bombay High Court in a recent verdict has ruled that groping without skin-to-skin contact is not sexual assault.

Gujarat Forest Dept to take legal action against Christian Evangelist Paul Dhinakaran over unauthorised use of the department’s logo

Website of Paul Dhinakaran claims of collaborating with the Gujarat Forest Department, a claim junked by the latter
- Advertisement -

 

Col Bikkumalla Santosh Babu who laid down his life in the Galwan valley clashes to be decorated with Maha Vir Chakra

Col Bikumalla Santosh Babu of the 16th Bihar Batallion had laid down his life in the Galwan Valley clash on June 16

Prosenjit Chatterjee breaks his silence on the Netaji Subhash Chandra Bose portrait controversy: Read what Bumba Da has to say

Bengali actor Prosenjit Chatterjee has broken his silence on the nonsensical controversy over the Netaji Bose portrait.

‘The wind blowing from Punjab will burn Modi to ashes’: SP leader Abu Azmi instigates protestors to create mayhem

Abu Azmi made incendiary remarks at a protest staged in Mumbai in support of the ongoing farmers' protest. Sharad Pawar was present too.

Ashoka University Assistant Professor mocks Lord Ram while trying to troll President of India over false accusations

Neelanjan Sircar works as an Assistant Professor of Political Science at the Ashoka University and also a also at the Centre for Policy Research.

‘Naive and far from truth, just like imaginary Nehruvian utopia’: Read why veterans of Indian Armed Forces want Rahul Gandhi to apologise

Veterans of the Indian Armed Forced have condemned the recent statement by former Congress President Rahul Gandhi.

A Maulvi’s job is to teach religion, education of students is the govt’s responsibility: Himanta Biswa Sarma on madarsas

Answering to Badruddin Ajmal's allegations, Himanta Biswa Sarma stated that Hindus do not attack Mosques, it is Ajmal's own ancestors who had attacked and destroyed Hindu temples.

After getting offended over ‘Jai Shree Ram’ chants, Mamata Banerjee complains about being ‘teased’ in front of the Prime Minister

Mamata Banerjee was addressing a public rally in Hooghly's Pursura months ahead of state legislative assembly election

Jharkhand: Family of Puja Bharti, who was found dead with hands and legs tied, dismisses ‘suicide’ claims, demand CBI inquiry

Puja Bharti's father dismissed the suicide theory and questioned if it were indeed suicide, how were here hands and legs tied up.

After 1500 Jio towers were destroyed by Punjab ‘farmers’, has Rahul Gandhi cut down on his Adani-Ambani jibe?

From the last few weeks, Rahul Gandhi has consciously refrained from making “Adani-Ambani” jibes to attack the Modi government

Khalistani terror group SFJ calls CISF to threaten ahead of Republic Day, urges protestors to hold Bhindrawale posters

The phone call to CISF was reportedly made on behalf of SFJ's Gurparwant Singh Pannu.

Connect with us

245,563FansLike
496,912FollowersFollow
22,900SubscribersSubscribe