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RBI autonomy important, retain its special status: Former Planning Commission Dy Chairman

Joining the debate on Reserve Bank’s autonomy, former Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday said the special status of the central bank should be preserved.

“RBI is special and that specialness should be retained. It is better to have complete transparency…It is good idea to change regulation… The autonomy of Reserve Bank is extremely important and whatever is done in future, in my view, should be consistent with that objective,” Ahluwalia said in an interview to CNBC-TV18.

“The whole idea of having central bank and also monetary committee is anchored on the notion that an independent central bank professionally run taking long term view of monetary and financial side is something that contributes to people’s belief that economy is going to be well run. We cannot afford to lose that,” he added.

Earlier, the issue of RBI’s autonomy was raised by Nobel laureate Amartya Sen and former governors Y V Reddy and Bimal Jalan. RBI union too expressed concerns over dilution of central bank’s autonomy over the way demonetization issue has been handled by the Finance Ministry. The ministry, however, had said that the government respects the autonomy and independence of the Reserve Bank.

On filling six-seven vacancies on RBI board, he said, “That should be the highest priority. In a way it is the simplest thing to fix. The quality of people we appoint on the board will give the signal, how serious we are about it. It is the easiest thing to correct.”

Elaborating further, he said, “RBI is not just another regulator. I think RBI is special because it is not just responsible for monetary policy but it should be actually responsible along with Finance Ministry for overall financial stability.”

He was of the view that it would be much better to accord special status to RBI and let it be examined by some Parliamentary Committee in open public hearing. Asked about any legislation for maintaining autonomy of the RBI, Ahluwalia said, “If you need legislation for that there is nothing wrong in that. I think you should be clear about what do you want. It can be done with or without legislation.”