RBI Governor Raghuram Rajan on Tuesday finally appeared to fall in line with the Government’s decision in removing the veto power of the central bank’s Governor, arguing that it would be better for a committee to decide the key rates rather than one individual.
“While the details of the monetary policy committee will have to be ironed out, there are no differences between RBI and the Government on this matter. Currently, the situation is Governor has a veto, that is, effectively all advice is only advice and ultimately decision is Governor’s. So, if we continue to retain a veto, it doesn’t change the current situation. It maintains the status quo. That is something to keep in mind,” Rajan told reporters here.
The Finance Ministry on July 23 put up a revised Indian Financial Code (IFC) draft on its website suggesting doing away with the veto power and a seven-member monetary policy committee with a majority from the Government.
listing out ‘three virtues’ of taking the monetary policy decision away from the Governor and giving it to a committee, Rajan said that when a committee decides on rates, it lessens the pressure on individual and also ensures continuity in policy when any single member of a committee changes.