Finance secretary said that the government is seeking comments on it which indicates that it is still under discussion
Finance secretary Rajiv Mehrishi on Monday clarified that the government was not trying to curtail RBI's power to set interest rates in the country.
New Delhi: Finance secretary Rajiv Mehrishi on Monday clarified that the government was not trying to curtail RBI’s power to set interest rates in the country.
A controversy has risen after the finance ministry published a revised draft of the Indian Financial Code (IFC) that would reduce the RBI independence to set interest rates.
“This is still to be considered by the government as a discussion paper. So from that, to jump to a conclusion that some curtailment of the power of the RBI has been made or the government has decided to do so would be incorrect,” the secretary said.
He said that government’s views on the IFC will be revealed when the draft Bill is brought before the Parliament for consideration and approval. The revised draft, released by the finance ministry on July 23 for public comments recommended doing away with veto power of RBI chief on interest rates and suggested the seven-member Monetary Policy Committee (MPC) take decisions by a majority vote.
Finance secretary said that the government is seeking comments on it which indicates that it is still under discussion.
The secretary said that a final view on a monetary policy committee would be taken based on the feedback as well as international best practices and thus in consultation with all stakeholders.
“The RBI governor does not fix monetary policy in most countries,” Mr Mehrishi said. He added that the setting up of monetary policy committee (MPC) is not dependent on introduction of IFC and added that the committee has gained urgency in the light of monetary policy framework agreement signed by RBI and the government.
“Since we have signed Monetary Policy Framework Agreement with the RBI, we are in discussion with RBI governor, on the form and the manner of the MPC.
Pressure piles up on RBI gov to slash rates today
Pressure is mounting on the RBI to cut interest rates in its third monetary policy review of this fiscal on Tuesday while experts are divided over the issue, saying high retail inflation may hold it back from doing so.
Most bankers and experts believe that the possibility of an interest rate cut by the Reserve Bank on August 4 is very low as retail inflation remains high. However, India Inc is pitching for a rate cut because of low wholesale inflation and slowdown in industrial growth.
Even the government wants the benchmark rate to be cut to prop up growth.
“I am not expecting any rate cut,” SBI chairperson Arundhati Bhattacharya said. While retail inflation in June rose to an eight-month high of 5.4 per cent, the WPI-based inflation was (-)2.4 per cent in the same month.
( Source : deccan chronicle/agencies )
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