The Reserve Bank of India logo is displayed on the bank’s building in Mumbai, India. (Photographer: Adeel Halim/Bloomberg)

Not Sudden Outburst But Long Overdue, Says RBI Employees’ Union On Acharya’s Comments

A government undermining central bank independence is a recipe for disaster and Reserve Bank of India Deputy Governor’s recent comments were an outburst waiting to happen.

That's according to a recent press release by the RBI's employee union. Acharya's "sharp observations" in a recent lecture in Mumbai have created a "flutter across the nation", the All India Reserve Bank Employees Association said. "This is, however, not a sudden outburst, but was waiting to happen due to a long-simmering discontent."

We firmly hold that undermining the central bank is a recipe for disaster and government must desist (from) it. Let the two talk and sort out issues instead of the government trying to ride the roughshod over the RBI.
RBI Employees’ Union.

Viral Acharya had raised concerns on the central bank’s independence being put in danger, during a lecture delivered in Mumbai last week. The pressures by the government ranged from easing of Prompt Corrective Action norms on weaker banks or setting up of a Payment Regulatory Board, outside the central bank.

This was not the first instance of a rift between the government and the RBI. However, the hiatus has widened now due to “continuous nibbling” of government and the finance ministry, said the union. “Even the RBI board is stuffed in a particular direction which would prompt the discerning people to look askance.”

Eleven state-owned lenders are under the PCA framework that places restrictions on banks with weak financial and operational metrics. Earlier, BloombergQuint had 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 union also appealed to experts to persuade the government to amend and let RBI perform its duties in an unfettered manner.