The Modi government plans to change the Reserve Bank of India Act before the end of the fiscal year, to set up a new committee to direct the country's monetary policy. The committee would comprise of appointees from the government, the Reserve Bank of India, and other independent members appointed by the government. However, any changes made, will have to be approved by the Parliament.
The Central Bank and the Finance Ministry have been trying to resolve differences over the panel's composition; mainly over the balance of representation between government and RBI appointees. The finance ministry last month hinted at retreating from a blueprint that would have ensured its effective control over a seven-member committee.
RBI Governor Raghuram Rajan reported that the central bank and government have reached a “broad consensus” on the composition of a rate panel, not disclosing details. Meanwhile, newly appointed union home secretary Rajeev Mehrishi said the composition of the panel would reflect the views of Rajan, the government and lawmakers, but details would be disclosed first to the parliament. “His views have been noted and would be taken into account in making any decision. But what the decision is does not depend solely on the RBI governor,” Mehrishi said. He also reported plans to set up an independent public debt management agency (PDMA), mainly under New Delhi's control, in the current fiscal year, which ends next March.
He said the finance ministry had agreed in principle with the RBI to allow Indian bonds to be settled through Euroclear, world's largest securities settlement system, as part of efforts to boost capital inflows and deepen the bond market. “It is a FEMA requirement so RBI has to consult the government,” he said. “So we will respond to RBI. I think this week or latest by next week.”
