NDA govt not trimming RBI's powers: Fin Secy

Rajiv Mehrishi says govt will bare its mind on IFC in Parliament

The government is not trying to cut the Reserve Bank of India’s monetary policy-making powers, Finance Secretary Rajiv Mehrishi said on Monday, days after the Indian Financial Code (IFC) draft report created a furore that the government was keen on clipping the Central bank’s wings on deciding policy rates.

“The IFC report is still to be considered by the government as a discussion paper. So from there, 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,” Mehrishi said, adding that the government’s views on the IFC will be revealed when the draft bill is brought before Parliament for consideration and approval.

Mehrishi also sought to put at rest the controversy that the IFC report was based on suggestions of the Financial Sector Legislative Reforms Commission (FSLRC) findings submitted to the government during the UPA regime.

“If you look at the website, it does not say that it is by the FSLRC. The people of India own this draft that is why it is in public domain,” Mehrishi said. His clarification comes a day after an FSLRC member said the draft IFC bill seeking to clip RBI chief’s veto in deciding interest rates was not based on FSLRC’s views.

But Mehrishi’s clarification contradicted Minister of State for Finance Jayant Sinha and Chief Economic AdvisorArvind Subramanian’s comments that IFC report was based on FSLRC findings.

The revised draft suggested doing away with this veto power and wants the seven-member MPC to take decisions by a majority vote. Under the present system, the RBI governor has veto power over the existing advisory committee of RBI members on the monetary policy that sets interest rates.