RBI governance structure need further examination, says board
The central board of Reserve Bank of India (RBI), which met under new Governor Shaktikanta Das on Friday, said the governance structure of the central bank needs further examination before deciding on whether it can be board-driven.
"The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination," the RBI said in a statement.
RBI's governance is a major bone of contention between the government and the bank, which led Urjit Patel to quit as RBI Governor on Monday. The government wants RBI to be driven by the board instead of the Governor, as is currently the case.
Under the current structure, the board has 18 directors including four Deputy Governors, four Directors from the RBI's local boards, two government nominees and others appointed by the government. Many of these appointments to the board are political.
With non-technical people (non-economists) as Directors in the board of the central bank, the final word on any economic policy by the RBI is that of the Governor. However, the Central government wants the RBI Governor to be accountable to the board.
The board also reviewed other contentious issues like liquidity in the economy and credit in the market which soured the relationship between the government and the central bank over the past several months, with the government wanting the RBI to intervene.
"The board reviewed, inter alia, the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy and issues related to currency management and financial literacy," the statement said.
It was the first board meeting under the chairmanship of Shaktikanta Das, who was earlier Economic Affairs Secretary in the Finance Ministry and one who steered the monetary situation in the country post-demonetisation.
The draft report on Trend and Progress of Banking in India (2017-18) was also discussed at the meet, the RBI said.