More independence a necessity to adopt policy panel: RBI

The Reserve Bank India (RBI) needs greater independence before it can adopt a monetary policy committee structure, Governor Duvvuri Subbarao said on Monday.

The Reserve Bank of India is one of the few major central banks where monetary policy decisions rest in the hands of the governor, as opposed to a committee.

While the Reserve Bank India is not statutorily independent, in practice it has wide latitude in setting monetary policy.

"India also needs to move towards a monetary policy committee structure," said Reserve Bank India chief in answer to a question following a speech at the Bank of Mauritius, which has such a committee in place.

Successor

"For that to happen there are some necessary conditions to be fulfilled and one of the necessary conditions must be more independence of central bank," Subbarao said.

India's chief economic adviser, Raghuram Rajan, widely seen as the likely successor to Subbarao, whose terms expires in September, favours moving towards a more powerful monetary policy committee.

The Reserve Bank India  has a technical advisory committee on monetary policy, which was set up in 2009 as a precursor to a formal policy committee.

However, the committee has only an advisory role and Subbarao has in several instances made policy decisions that went against the majority view of the panel.