RBI to come under direct scrutiny of Centre, new Parliament proposal suggests: Report

Jayant Sinha, Chairman, Finance Standing Committee

The Parliament’s Finance Standing Committee has proposed examining the supervision of financial institutions, the inflation guidelines and monetary transmission. This is in addition to installing a performance appraisal of the banking system, Mint reported.

All of these functions are under the purview of the Reserve Bank of India (RBI). If the proposal goes through, it would bring India’s central bank under the Centre’s direct scrutiny, the paper noted.

Moneycontrol could not independently verify the report.

The move would improve the RBI’s functioning and strengthen the institution, with the committee’s role being “constructive and forward-looking”, the paper quoted Committee Chairman Jayant Sinha as saying.

As it stands now, the RBI Governor reports to the Parliament through the Finance Standing Committee.

“We will shortly be having him (Governor Shaktikanta Das) come and present to the committee as well. As has been the practice, we will examine a host of issues related to RBI,” Sinha added.

The development follows criticism of the Central Bank in the aftermath of the Punjab and Maharashtra Bank fraud due to the debate around the RBI’s monetary policy transmission. The latter was also discussed in the Jalan committee report.

Sinha further said this would help analyse India’s path to becoming a $5 trillion economy and “examine whether India’s regulatory institutions are well-equipped and robust, that they are equipped for the demands of the future."