Lok Sabha Question No. 872 (UNSTARRED), answered on 2018-12-14
Subject: RBI Autonomy
Ministry: FINANCE
Asked by: SUSHMITA DEV, JYOTIRADITYA MADHAVRAO SCINDIA, KUNWAR PUSHPENDRA SINGH CHANDEL

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 872 TO BE ANSWERED ON THE 14 TH  DECEMBER 2018/ AGRAHAYANA 23, 1940  (SAKA)

RBI Autonomy

## 872.  KUMARI  SUSHMITA  DEV: SHRI JYOTIRADITYA  M. SCINDIA: SHRI KUNWAR  PUSHPENDRA  SINGH CHANDEL:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  former   Governors   of  Reserve   Bank of  India  (RBI)  and  renowned economists  have recently  defended the central  bank's  call for greater  autonomy  from  the Government,  if so, the details  thereof;
- (b) whether the Government has been creating an atmosphere to curb  the independence  of the RBI, if so, the reaction of  the Government  in this regard;
- (c) the concrete  steps proposed  by  the Government  to strengthen  the autonomy  of the RBI; and
- (d) whether  the Government  has received  any  proposal  to provide  more  autonomy  to RBI with  a view  to giving  a boost to economy;  and
- (e) if so, the details  thereof?

## ANSWER Minister of State in the Ministry  of Finance

## (SHRI SHIV PRATAP  SHUKLA)

(a) to (e): The autonomy  for the Central  Bank,  within  the framework  of the RBI Act,  is an  essential   and  accepted   governance   requirement. A  Press  Release   was  issued  by   the Government  on October  31, 2018 as below:

'The  autonomy   for  the  Central   Bank,   within   the  framework of  the  RBI  Act,   is  an essential  and accepted governance  requirement. Governments  in India have nurtured  and respected  this.  Both the Government  and the Central  Bank,  in their  functioning,  have to be  guided   by   public   interest   and  the  requirements of  the  Indian   economy.   For  the purpose,   extensive   consultations   on  several   issues  take   place  between   the  Government and the RBI from time  to time.  This  is equally  true  of all other  regulators.  Government of India has never  made public  the subject  matter  of those consultations. Only  the final decisions  taken  are communicated. The Government,  through  these consultations,  places its assessment on issues and suggests possible  solutions.  The Government  will  continue to do so.'

As per the provisions  of the section  58 of the Reserve  Bank  of India (RBI) Act,  1934, the Central   Board  of  RBI,  with   the  previous   sanction of  the  Central   Government,   is empowered   to  frame  regulations   to  provide   for  all  matters for  which   provision   is necessary  or convenient  for the purpose  of giving  effect to the provisions  of the RBI Act.

Government  has taken  several  measures  to strengthen  the RBI. These include, inter alia, constitution   of  the  Monetary   Policy   Committee to  provide   a  statutory   basis  for  a Monetary  Policy  Framework  through  an amendment  of the Reserve  Bank of India Act, 1934. Further  to strengthen  the regulatory and supervisory  powers  of RBI to effectively deal with  distressed  assets of the banking  sector,  RBI has been empowered  through  the Banking  Regulation  (Amendment)  Act,  2017, to issue directions  to any  banking  company, for timely  resolution  of stressed assets, and for initiating insolvency  resolution  process in respect of a default  under the  provisions  of the Insolvency  and Bankruptcy Code,  2016.