Jawaharlal Nehru said RBI autonomy subject to government direction, it's still true: Top government functionary

Benegal Rama Rau quit in 1957 after Nehru supported his finance minister T T Krishnamachari in his clash with the then RBI governor over a proposal, the functionary said.

Published: 06th November 2018 12:11 AM  |   Last Updated: 06th November 2018 12:11 AM   |  A+A-


For representational purposes (File | Reuters)


NEW DELHI: Accused by the Congress of trampling on the RBI's autonomy with its interference, a top government functionary said Monday it was the country's first prime minister Jawaharlal Nehru who asserted that the central bank enjoyed autonomy but it was also subject to the Centre's directions and those comments still hold true.

The top functionary, who did not want to be named, also cited several instances of clash the earlier governments at the Centre, right from the Nehru-led dispensation to the UPA's, had with the central bank over policy issues which at times led to the resignation of the RBI governor.

Benegal Rama Rau quit in 1957 after Nehru supported his finance minister T T Krishnamachari in his clash with the then RBI governor over a proposal, the functionary said.

To Rau's assertion about the RBI's autonomy, Nehru had apparently said the central bank is certainly autonomous but it is also subject to the government's directions, he claimed.

"What Nehru said remains true now," the government functionary said when asked about the Narendra Modi government's take on its differences with the Urjit Patel-led RBI.

While Congress president Rahul Gandhi has accused the government of "destroying" institutions with its alleged strong-arm tactics, the differences between the Modi government and the RBI came out in public domain after a deputy governor raised concerns about the central bank's autonomy and warned that the governments that did not respect the central bank's independence would sooner or later incur the wrath of financial markets.

Days later, another deputy governor criticised the government's arguments for easing capital requirements for lenders, saying it would result in banks being strong only in a "make-believe" manner.

While many see the ongoing tussle between the government and the RBI as unprecedented, the top government functionary also cited instances of RBI governors N C Sengupta and K R Puri, saying their tenures were cut short due to the central government's intervention.

He claimed Sengupta had to go due to his stand on the issue of bank loan limit for Maruti project, a brainchild of Sanjay Gandhi, son of the then prime minister Indira Gandhi, while his successor Puri quit in 1977 at the prodding of the Janata Party government.

He also claimed that Manmohan Singh, who was the RBI governor during 1982-85, was made the erstwhile Planning Commission's deputy chairman as the then Rajiv Government wanted another person at the central bank.

Singh went on to become prime minister for 10 years.

The official also referred to the memoir of D Subbarao about his tenure as RBI governor between 2008-13 to highlight his strained relations with the then Finance Minister P Chidambaram.

Stay up to date on all the latest Nation news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

  • badri narayanan poondi

    It's not quite the protocol to compare the rule of the royal dynasty with the fleeting tenures of political parties... So still Rahul
    5 months ago reply
flipboard facebook twitter whatsapp