BUSINESS MANTRA, FARIDABAD: Lalit Virmani
(Author is an Ex-Banking Executive)
As suggested by the Indian Finance Code (IFC) the Government of India has decided not to allow RBI Governor to use Veto Power for setting of benchmark interest rates and other monetary measures to check inflation and other monetary policy related issues.
But the government has decided to vest these decisions to Monetary Policy Committee (MPC) consisting of RBI Chairperson, one member of RBI Board and other four members nominated by Central Government. Hence this move shall cut the power of veto enjoyed by RBI Governor. It is considered to be a matter of conflict between RBI and Central Government.
Presently, even if MPC decides on interest rates and other monetary policy decisions, yet RBI Governor can change the decision of the MPC by using Veto Power.
This move of the government, has been widely criticised by various economists including the former RBI Governor Dr. C. Rangarajan, who has said that the power should not be cut as it decides the monetary policy of the country and interest rates to control inflation .
Due to wide criticism, the Government of India has hold the decision to cut the Veto Power of RBI Governor.
Perhaps, the government may decide on this issue after the current parliament session, since in current monsoon session of parliament there are other burning issues, on which opposition has kept the government busy