Undermining the central bank’s independence is a recipe for disaster, and Viral Acharya, Deputy Governor, Reserve Bank of India proved this with his comments recently.
According to a press release by RBI’s employee union, Acharya’s sharp observations and outburst at a recent lecture in Mumbai were not surprising, and have rightly created a flutter across the nation.
Acharya had raised concerns on the central bank’s independence being put at risk. The Government has been pressurising RBI on issues ranging from easing Prompt Corrective Action (PCA) norms on weaker banks to setting up a Payment Regulatory Board, outside the central bank.
This was not the first instance of a clash between the Government and RBI. However, the cracks have widened due to continuous interference of the Government and the Finance Ministry.
Eleven state-owned lenders are under the PCA framework that places restrictions on banks with weak financial and operational metrics. Earlier it was reported that the Government had taken up the issue of easing some of the restrictions placed on these banks during the RBI board meeting held last week.
The RBI employee union has appealed to experts to persuade the Government to allow RBI to perform its duties in an unfettered manner.