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RBI’s ability to say ‘no’ to govt must be protected: Rajan

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New Delhi, Sep 3 (PTI) A day before demitting office,Reserve Bank Governor Raghuram Rajan today said the RBI’sability to say ‘no’ to highest echelons of government has tobe protected as the country needs a strong and independentcentral bank. Delivering a lecture on ‘independence of the centralbank’ at the St. Stephens College here, the outgoing governorsaid the central bank cannot be free of all constraints as ithas to work under a framework set by the government. Recalling his predecessor D Subbarao’s comments on policydifferences with the government, Rajan said he "would go alittle further" as he believes that "the Reserve Bank cannotjust exist, its ability to say ‘no’ has to be protected." "In this environment, where the central bank has tooccasionally stand firm against the highest echelons ofcentral and state governments, recall the words of mypredecessor, Dr. Subbarao, when he said "I do hope the FinanceMinister will one day say, ‘I am often frustrated by theReserve Bank, so frustrated that I want to go for a walk, evenif I have to walk alone. But thank God, the Reserve Bankexists," the outgoing RBI governor said. He further said that freedom to take operationaldecisions is important for the central bank. "However, there are always government entities that areseeking oversight over various aspects of RBI’s activities.Multiple layers of scrutiny, especially by entities that donot have the technical understanding, will only hamperdecision making," he said. Instead, the government-appointed RBI Board, whichincludes ex-officio government officials as well as governmentappointees, should continue to play its key oversight role. "In this regard, all important RBI decisions includingbudgets, licences, regulation and supervision are now eitherapproved by the Board or one of its sub-committees. Vacanciesin the RBI Board, which have remained unfilled for many monthsnow, should be filled quickly so that the full expertise andoversight of the Board can be utilised," he said. Rajan said central bank governors sit at the table alongwith finance ministers at G-20 meetings for a reason. "It isthe central bank governor, unlike other regulators orgovernment secretaries, who has command over significantpolicy levers and has to occasionally disagree with the mostpowerful people in the country." More PTI JD DP ANZMKJ

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