Finance Minister P. Chidambaram, on Saturday, pitched for limiting the Reserve Bank of India’s mandate to monetary policy formulation and banking regulation, and for delegating its other functions to government or other regulators.
“It (RBI) is the monetary authority and it will be a regulator of banks, but all other functions I think should be revisited and we should ask ourselves whether RBI is the best authority to discharge those functions or is there any other authority in the system which can take over those functions or is it necessary to create a separate authority,” Mr. Chidambaram told a panel discussion on the occasion of celebrating the 20th anniversary of NSE here.
Stating that Financial Sector Legislative Reforms Commission (FSLRC), headed by Justice B. N. Srikrishna, has made similar recommendations, Mr. Chidambaram drew on the global experience and said the RBI did much more work than other central banks.
“What the FSLRC says is that some functions of the RBI can be better done by the government and some functions can be entrusted to new bodies. I think it is a well-argued thought and well-reasoned thought,” he said. It can be noted that the past RBI Governor D. Subbarao was a vocal critic of the FLSRC report, which primarily clips the wings of the central bank.
Apart from the above-mentioned functions, the RBI’s charter includes responsibilities such as issuing currency, being banker to the government, controller of credit and custodian of forex reserves, among others.
On the recommendations of the FSLRC, Mr. Chidambaram said as passing legislation on the suggestions would take time, it had been decided to implement the non-legislative ones first.