New Delhi, July 24: Modi Government which has been facing flak for meddling into number of recent matters, is likely to face Opposition's ire once again. The reason being, the Government is now planning to dilute powers of the chief of Reserve Bank of India (RBI).
Reportedly, Modi government has proposed taking away RBI chief's authority to veto the interest rate decision of the central bank's monetary policy committee. On Thursday the Finance Ministry released a revised draft of Indian Financial Code (IFC) proposing that a committee will be formed to take decision in this regard.
At present, the RBI governor consults a Technical Advisory Committee, but does not necessarily go by the majority opinion while deciding on the monetary policy stance.
According to new proposal, an all-powerful monetary policy committee would have four representatives of the government and only three from the central bank, including the 'RBI Chairperson' - thus giving full control to the government on policy rate.
The revised draft talks of 'RBI Chairperson' and not 'RBI Governor'. RBI is headed by a governor, at present.
The IFC, which is conceived as an overarching legislation for the financial sector, proposes that the monetary policy committee will be entrusted with the task of deciding the key policy rate and chasing the annual retail inflation target to be decided by the government in consultation with the RBI.
"Inflation target for each financial year will be determined in terms of the Consumer Price Index (CPI) by the Central Government in consultation with the Reserve Bank every three years," said the draft, on which the Finance Ministry has invited comments till August 8.
The first draft, submitted in March 2013, too had talked about the committee and majority vote, but gave powers to RBI chairperson to supersede the decision of the panel.
"In exceptional and unusual circumstances, if the RBI Chairperson disagrees with a decision taken at a meeting of the Monetary Policy Committee, the RBI Chairperson will have the right to supersede such decision," it had said. This provision has been dropped in the revised draft.
(With inputs from PTI)