Acknowledging that the Reserve Bank of India (RBI) listened and considered all proposals of the Central government, former RBI Governor Raghuram Rajan said the apex bank always took decisions based on national interests.
Speaking to business news channel CNBC-TV18, Rajan said the central bank after listening to all the proposals and issues of the government, gives its best “professional” reply.
“It has a responsibility to fulfil. It has to listen, of course, but at the end, it has to make a decision because ultimately it has that responsibility,” he said.
On reports that the government might have imposed Section 7 of the RBI Act curtailing its autonomy, he said it is unlikely that any such step has been taken, suggesting that both the government and the RBI should respect each other’s motivation and thoughts.
“I think certainly it would be best if both sides respected each other’s motivation and thoughts… the RBI after listening to the government has provided the best professional answer… and historically it has done that,” he said.
“I have no doubt it is doing that today.”
His statement assumes significance amid recent signs of a rift between the government and the bank. RBI Deputy Governor Viral Acharya in October during a speech said the government might face markets’ wrath if it was seen eroding the central bank’s independence.
In his interview with the news channel, the former Governor described RBI as a “seat belt”, which would save the “driver” — the government — if an accident occurs.
“The RBI is something like a seat belt, the driver being the government… there could be a possibility of not putting on a seat belt. But of course, if you do not put on your seat belt, (in case of an accident), the impact could be quite severe,” he said.