Leave RBI alone

Former RBI deputy governor K.C. Chakrabarty’s statement that it should be made accountable to Parliament as it is created by the legislature, and has “more autonomy and less accountability”, is surprising even though coming from someone as outspoken as Mr Chakrabarty. He admits the RBI’s current accountablity to Parliament is through the finance ministry, but obviously feels this is not direct enough as he suggests a debate on it. That could be fraught with danger.

The logic is that in “mature democracies” the central bank is accountable to society through Parliament. The operative phrase is “mature democracies”. India is a very young democracy, and its Parliament tends to be partisan. This is reflected in the way political parties are able to hold it to ransom session after session. It is bad enough that the RBI is somewhat subservient to the finance ministry. But imagine if the RBI governor has to answer to Parliament — it may end up as an arm of one political party or another. And that would definitely not be a good idea.

Till now the RBI has worked quite independently and maintained its independence as it has had strong governors. Most recent scams — 2G, CWG, Coalgate, etc — were ostensibly due to political interference. Perhaps it may be wiser to let things be as they are, especially since the RBI is already moving towards global “best practices”, and has appointed panels on a variety of issues, from inflation to financial inclusion.