Rate panel row twist: 'Public' owns RBI guv veto proposal

After increasing controversy over a move to take away the Reserve Bank of India Governor's veto power on key interest rate decisions that will be taken by a proposed monetary policy committee, the government of India today made it clear that it did not come from a recommendatory report by a panel headed by Justice BN Srikrishna.At a press conference, Finance Secretary Rajiv Mehrishi said that the 'Revised Indian Financial Code' put up on the Finance Ministry's website last week, which made the veto suggestion could be termed as "Draft 1.1" -- and in which certain changes had been made from the original recommendations of the Srikrishna committee's FSLRC report. This was despite Finance Minister Arun Jaitley and Chief Economic Advisor Arvind Subramanian indicating the financial code's recommendations were views of the FSLRC, and not the government's. Justice Srikrishna's FSLRC report had suggested had also suggested forming a seven-member MPC but had said that that RBI chairperson could override its decisions in "exceptional and unusual circumstances". The second point was dropped in the revised draft code.The revised draft code generated a outcry from experts as well as the public, and was seen many as threatening the independence of the Reserve Bank of India.Observers said RBI could also not be held responsible for implications -- such as on matters of price stability -- of policy decisions taken by a committee it had no control over.Ratings agency Moody's had also written a scathing report, terming the suggestion 'dangerous'.But Mehrishi blamed the media for "jumping to the conclusion" that suggestions in the revised code were exactly the same as the FSLRC's, and said due process such as public comments on the FSLRC report was taken into account after coming up with a revised draft.When asked who was the author of the revised draft, the Finance Secretary said: "the people of India" did. "Let's say the FSLRC's report was Draft IFC 1.0. The present draft is 1.1."He added that the government was in touch with various stakeholders, including RBI governor Raghuram Rajan on the formal composition of the MPC."We now have a position that we have almost agreed upon but I can't disclose it because we will disclose it in the Parliament," he said.The issue raises concerns over the manner in which the government has handled the issue, as well as the recommendation itself, CNBC-TV18's Banking Editor Latha Venkatesh said."If these (taking away the RBI governor's veto) are not the FSLRC's recommendations, then whose are they?," she said. "Such important matters, involving such complex and esoteric issues, cannot be decided by inviting comments from the 'public'.""It smacks of a turf war and a lack of understanding of the issue," she added.- Written by Nazim Khan