After four months of debate and discussion, the Reserve Bank of India and the Finance Ministry have overcome the stalemate over the most significant reform in the central bank’s 80-year history.
Both sides have abandoned their original position on the proposed amendments to the Reserve Bank of India Act to reset the responsibility of deciding India’s monetary policy, including the decision on interest rates, and have arrived at a mid-way position.
The Ministry’s note for the Cabinet’s approval proposes a five-member Monetary Policy Committee.
The government will nominate two members and the RBI one expert, besides two of its officials: the Deputy Governor and the executive director dealing with monetary policy.
Each of the five members would have one vote and the RBI Governor, chair of the committee, will have a casting vote in the event of a tie in situations such as the absence of a member, a top official of the Finance Ministry told The Hindu .
The source, however, refused to say whether the Governor would also have the right to overrule the committee's decision.
