Washington – The ongoing spat between the Reserve Bank of India (RBI) and the government caught the attention of the International Monetary Fund which recently expressed its concern saying independence of the central bank was of utmost importance.
Speaking to reporters on November 2, IMF director of communications Gerry Rice said, “We’re monitoring the development on that issue and will continue to do so.”
“I’ve said this before standing here that we support clear lines of responsibility and accountability... And, the international best practice is that there should be no government or industry interference that compromises the independence of the central bank and financial supervisor,” Rice said.
The controversy sparked off when RBI deputy governor Viral Acharya pitched for “effective independence” of the central bank in a lecture on October 26.
“Governments that do not respect central bank’s independence will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution,” Acharya had said.
“Wiser governments which accord the necessary leeway will benefit through lower costs of borrowing, the love of international investors and longer life spans,” he said.
In response to the claim, the government issued a statement saying it respected and nurtured the autonomy of the RBI.