- 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.
- A certain amount of creative tension is systemically in-built between Reserve Bank of India and Centre given their different perspectives.
- For example, Centre’s concern is short-term and political while RBI’s concern is long-term and technical.
- 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.
- 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.
- 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.
- The Centre and the central bank must talk behind closed doors and resolve their differences as mature entities i a amicable manner.