In order to enable closer supervision of the central bank, India’s government has proposed changing rules, Bloomberg reported, quoting sources.
According to the Bloomberg report, a recommendation has been made by Prime Minister Narendra Modi’s administration that the board of the Reserve Bank of India draft regulations to enable setting up of panels for overseeing functions including financial stability, monetary policy transmission and foreign exchange management.
The central bank’s board is scheduled to meet on Monday, 19 November, reports Bloomberg.
The change is being suggested in order to empower the regulator’s board and give it a supervisory role. The regulator’s board includes government nominees as well.
The considered recommendations include setting up several committees. According to the sources Bloomberg report quoted, the body has the powers to frame rules under section 58 of the Reserve Bank of India Act, 1934 and no legislative change is required.
The move may only fuel the existing tension between the central bank and India’s finance ministry. Both the central bank and the finance ministry are already feuding over issues like transfer of surplus funds, easing of bad loan norms and ensuring liquidity to the shadow banking sector.
According to the government, the central bank is not providing support to boost growth, whereas RBI rejects the idea by claiming that transfers could undermine the body’s independence and eventually hurt the markets.
(With inputs from Bloomberg.)
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