Skip to main content

RBI could lose veto on interest rates under new financial code

By
Governor can’t supersede RBI-govt joint panel’s decisions, can only cast vote in the event of a tie
The government has proposed to effectively take away the Reserve Bank of India (RBI) governor’s overriding powers on interest rate decisions, a move that could dilute the central bank’s status as an independent and autonomous monetary authority.
The government instead has proposed to give an additional vote to the RBI governor in case of a tie in any meetings of a yet-to-be set up monetary policy committee, which will decide on interest rate hikes and cuts.
These proposals are part of the revised draft Indian Financial Code (IFC) that the finance ministry put out on Thursday.
The ministry has sought further comments from public by August 8. The government is likely to follow this up by moving to enact a an Indian Financial Code (IFC) Bill which will subsume more than 60 archaic legislations to make them contemporary.
The IFC is based on the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) under Justice BN Srikrishna
The first draft IFC report submitted in 2013 had proposed giving the RBI governor the right to supersede decisions if the central bank chief disagrees with the monetary policy committee.
“If the RBI chairperson exercises the right, an explanatory statement must be submitted by the RBI chairperson to the central government on the same day when the meeting where such right was exercised is held,” the first draft had said.
The revised draft, however, had dropped this clause and instead offers a casting vote to the RBI chief in the event of a tie.
“In the event of a tie amongst the members of the monetary policy committee, the Reserve Bank chairperson will have a second and casting vote, it said.
In February, the RBI and the government had formally adopted a monetary policy framework, which will make taming inflation the primary priority of the central bank’s policy decisions.
Under the new system, the RBI will set a new retail inflation target of below 6% by January 2016 and 4% by March 2017.
The finance ministry has also suggested modifications regarding regulatory accountability of financial agencies, capital controls and regulation of systematically important payment system, among others, in the new draft.
Hindustan Times, New Delhi, 24th July 2015

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more