MUMBAI: RBI governor Raghuram Rajan on Tuesday dropped the biggest hint yet that the government may have its way in diluting the central bank’s powers. Rajan, who spoke on the veto power issue for the first time, said the apex bank supports the proposed Monetary Policy Committee (MPC) and that the government and RBI had reached a broad consensus.
Elaborating on the benefits of an MPC, Rajan said the panel can improve decision-making due to a cross-section of views, moving away from ‘internal and external pressures’ an individual faces in making decisions and continuity in policymaking. The MPC is likely to have seven members, including five government-appointed members, and has suggested doing away with the veto power to the RBI chief and instead reach consensus by a majority vote.
Rajan, however, batted strongly for the RBI’s autonomy and said the government has never interfered with the bank’s call though statutes give it the power. “The government has the right to give directions to RBI and tell it what it should do,” he added.