How Centre’s ‘board game’ fuelled the feud with RBI


How Centre’s ‘board game’ fuelled the feud with RBI

News:

  1. The simmering tensions between the Reserve Bank of India and the Centre found spectacular release recently through a public speech by Deputy Governor Viral Acharya.

Important Facts:

  1. A certain amount of creative tension is systemically in-built between Reserve Bank of India and Centre given their different perspectives.
  2. For example, Centre’s concern is short-term and political while RBI’s concern is long-term and technical.
  3. Though such tension is good for the economy, but there are few issues over which both the Centre and RBI are irked over each other.
  4. Centre- RBI Conflict:
  • Non-Performing Assets: Centre has refused to accept Governor Urjit Patel’s point that the RBI is hobbled by lack of adequate powers in regulating public sector banks to handle the non-performing assets crisis.
  • Forex reserve and fiscal deficit: The Centre is eyeing RBI’s burgeoning reserves to bridge its fiscal gap which RBI resents.
  • Payments regulator: The Centre is attempting to set up an independent payments regulator, which the RBI sees as encroachment of its jurisdiction.
  1. Recent tensions: The government’s intervention through the board sparked recent tensions               between RBI and Centre as follows:
  • Expulsion of Nachiket Mor: One of the board members, Nachiket Mor tenure was abruptly brought to an end by the government which is unprecedented in RBI’s history.
    • Nachiket Mor, one of the most articulate voices on the board, was extremely vocal against issues like regulatory forbearance and higher surplus transfer, which the government was aggressively pushing.

  7.Way Forward:

  • The Centre and the central bank must talk behind closed doors and resolve their differences as mature entities i a amicable manner.

 

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