Skip to main content

Centre to Ensure Monetary Policy Panel is Legal Tender

Centre and Reserve Bank in talks to effect statutory backing for the committee
The government wants to make sure that the monetary policy committee (MPC) that will take over interest-rate-setting functions has strong legal foundations and to that end has started discussions with the Reserve Bank of India (RBI).
This new monetary policy framework will replace the February 2015 agreement between the two.
The finance ministry has already sent a formal communication to the RBI on the issue.
“Some preliminary discussions have started,“ said a senior government official. “The previous framework was non-statutory and so a new one has to be finalized.“
The earlier 2015 monetary policy framework agreed to between the government and the central bank predates the amendment of the RBI Act in the budget session this year to provide for the MPC.
The 2015 agreement, therefore, lacked legal backing.
Based on the amended RBI Act, the government will issue a new framework through rules for which discussions have started.
The finance ministry wants to move quickly on this given that the new framework needs to be in place before the MPC selection process is finalized, the official said.
Two deadlines are coming upthe next monetary policy review is scheduled for August 9 and RBI governor Raghuram Rajan leaves office less than a month later. The government is expected to announce his successor shortly after Prime Minister Narendra Modi returns from his Africa visit on July 11. The objective of the framework sig ned in February 2015 is to “primarily ma intain price stabili ty, while keeping in mind the objective of growth.“ Under that agreement, the RBI would set policy in terest rates and aim to bring inflation be low 6% by January 2016 and within 4% with a band of +-2% for FY17 and all subsequent years.
This year, through the Finance Act 2016, the government amended the RBI Act to put in place a new monetary policy framework.
The new framework is being negotiated with the RBI on the back of this amendment that has also proposed the creation of a sixmember MPC that will set interest rates in line with the inflation target in the framework.
The government has already tasked a search and select panel headed by the cabinet secretary to identify the three non-RBI members of the MPC. The selection rules, terms of appointment and factors constituting failure to meet the inflation target under the MPC Framework were notified on June 27, 2016. The other three members will be from the RBI and include the governor as the panel's head.
Rajan's successor may join as officer on special duty as the government is keen on ensuring a smooth transition at the central bank, especially in wake of the global situation after Brexit.
The Economic Times New Delhi,06th July 2016

Comments

Popular posts from this blog

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

  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...

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...