Reserve Bank of India Governor Urjit Patel batted for autonomy of the institution in strong terms in his deposition before the Parliamentary Panel on Finance on Tuesday.
Mr. Patel made a presentation on the impact of demonetisation and the status of non-performing assets in the banking sector.
Avoids controversy
According to sources, while he steered clear of controversial questions, including the recent friction between the government and the RBI, Mr. Patel assured the Committee, headed by Congress MP M. Veerappa Moily, that he would submit written answers to all the questions posed by the members.
Another source said that given the large number of questions, the Governor was asked to file written replies in 10-15 days.
Mr. Patel made three key points at the meeting. First, he said, depositors’ interests were of primary importance for which autonomy was non-negotiable. Second, monetary policy should be the exclusive domain of the RBI.
He also asserted that maintaining the central bank’s reserves was extremely essential to maintaining the country’s AAA rating.
“He told us that it is only the experts and technocrats who should have a say in the country’s monetary policy. There would be a direct conflict of interest if any other committee is given say in the matter,” an Opposition MP told The Hindu .
The issue of central bank autonomy rose to the fore again following RBI Deputy Governor Viral Acharya’s speech last month, in which he cautioned against the Centre impinging upon the RBI’s autonomy and trying to direct its policy on key issues such as the prompt corrective action (PCA) norms, the classification of power sector NPAs, and the quantum of surplus to be transferred to the Centre.
‘G20 obligation’
Following a public back-and-forth between the central bank and the Finance Ministry, the issue came to a head when the Central Board of the Reserve Bank met on November 19 to take decisions on the issues raised.
BJP MPs Nishikant Dubey and Shivkumar Chanabasappa Udasi asked why India should follow the Basel III norms for the banking sector to which Mr. Patel said it was “obligatory” to follow the norms as per G20 commitments made by the government.
Mr. Patel also made a presentation about the state of economy, which he said was doing well.
The Committee will take stock of the developments at the crisis-hit IL&FS Group for three days from December 3, an official said on Tuesday.
On October 1, the government superseded the board of IL&FS after some of its group entities defaulted on debt payments which triggered concerns of a liquidity crisis in the financial market. The total debt of the group was pegged at ₹94,215.6 crore as of October 8. As part of efforts to rescue the group, the government appointed a new board with Uday Kotak as its executive chairman.
(With inputs from TCA Sharad Raghavan)
