November 02, 2018

Centre Vs RBI: IMF monitors situation in India, opposes move compromising independence of central banks globally


Amid reported rift between the Central Government and India’s central bank, the RBI, over certain key issues, the International Monetary Fund (IMF) notified that it was monitoring the same and also expressed its opposition to any move that compromises the independence of central banks anywhere in the world.

In this regard, IMF’s Communications Director Gerry Rice said, "We're monitoring the development on that issue and will continue to do so."

He added, "Just stepping back, as a general principal, and we've said this before. I've said this before standing here that we support clear lines of responsibility and accountability... And, international best practice is that there should be no government or industry interference that compromises the independence of the central bank and financial supervisor."

Highlighting that the independence of the central bank and the financial supervisor is of utmost importance across countries, Rice said, "We regard it as such and we have to make that statement in the context of a number of countries. So, I think that's probably the best response I can give you."

Earlier, on October 26, RBI’s Deputy Governor Viral Acharya had warned that undermining central bank's independence could be "potentially catastrophic", possible indication of the RBI being pushed to relax its policies ahead of general elections in 2019.

Later, on October 30, Finance Minister Arun Jaitley had criticized the RBI for failing to check indiscriminate lending during 2008 and 2014 which has led to the present bad loan or non-performing asset (NPA) crisis in the banking industry. As per reports, this issue had sparked tension between the Finance Ministry and the RBI over the autonomy of monetary policymakers.

Thereafter, on October 31, the Finance Ministry had said that the RBI's autonomy is "essential" and will be "nurtured".

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