Govt to clip RBI’s wings

raghuram1_2040836fCentral Government is contemplating to retain the authority over the vital role played by interest rates hitherto decided by the RBI.  It has proposed to seize the decision of RBI Governor to veto fixation of interest rate powers of the monetary policy committee. Interest rates influence the national economy controlled by IFC which is represented by four government members. Now RBI Governor decides Interest rates and he need not consider the members’ opinions. Governor could set aside their suggestions including that of the finance minister. Therefore Centre has decided to alter this system and propose a powerful Indian Financial Code, which will now be represented by four government members and three including the Governor. The new system enables the government to take decisions on fiscal matters independently and gives full control to the government on policy rate. But the Governor would head the proposed body as a chairperson. A liquidity review committee has been proposed to decide key interest rates. The new committee would try to achieve the target for strengthening liquidity. ByAugust 8, opinions may be finalized, according to finance ministry.

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