RBI cannot set policy alone: Financial Sector Legislative Reforms Commission (FSLRC) head

Former Supreme Court judge Justice BN Srikrishna, chairman of the Financial Sector Legislative Reforms Commission (FSLRC) seeking to overhaul financial sector laws, said the country’s monetary policy should not be decided by the Reserve Bank of India (RBI) alone, as he defended the recommendation to set up a monetary policy committee.

Under the draft Bill, the 7-member monetary policy committee would be headed by the governor and include two members appointed by the government in consultation with the bank, along with three outright government appointees. Even though, the governor will have the power to veto the panel decision, the reasons have to be submitted in writing, the draft bill has proposed.

“Who is running the country, the Reserve Bank or the government? Let’s understand this. As far as I know, I voted for the government to run the country, not the Reserve Bank,” Justice Srikrishna told dna on the sidelines of an event held in Mumbai on Thursday.

Currently, the monetary policy in India is set by the RBI governor alone, unlike most global central banks. Recent policy decisions by the RBI have not been too well received with the government.

Even though there is a technical advisory committee, Subbarao has often gone against it.