No disconnect between RBI and government: FM

Posted By: PTI
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New Delhi, Mar 22: Dismissing murmurs of differences with the RBI over trimming its jurisdiction, Finance Minister Arun Jaitley today said there is no 'disconnect' with the central bank and hoped banks would cut lending rate in tandem with monetary policy.

While Jaitley said there were regular interactions between the government and the central bank, Governor Raghuram Rajan opined that the proposed agency for managing government borrowing should be independent of the government and the RBI.


Emerging from the first post-Budget meeting between the Finance Minister and the RBI board, Rajan said future interest rate cut will depend on the pattern of inflation which could be impacted by recent unseasonal rains and hailstorms.

"We have complete free and frank discussions and therefore there is no question of any disconnect ... between the bank and the government, I have repeatedly clarified that," Jaitley said after the meeting which among other things discussed macroeconomic developments and operations of RBI.

Jaitley in his budget had proposed to shift powers to regulate trading in government bonds from RBI to capital market regulator Sebi. Besides, two have also reportedly differed on the Monetary Policy Framework Agreement that aims to bring inflation down to a pre-decided level.

"As far as proposals in the Finance Bill are concerned they are before Parliament. Some of them we discussed earlier, we discussed them even now ...I don't wish to comment at this stage," he said.

He further said that discussion between the government and the RBI always continues.

"They (discussions) have been beforethe budget and have taken place after the budget as well," he said. When asked whether banks would be pressurised to pass on rate cuts to consumers, Jaitley said government does not put pressure on banks but hopes, and it is hopeful that they would do it in line with the RBI policies.

On possibility of further easing of policy rate, Rajan said: "The primary factor in allowing for greater monetary easing will be the pattern of inflation and how that proceeds."


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