(LiveMint)
The government has proposed changing rules that will enable closer supervision of the central bank, people with knowledge of the matter said. The government has recommended that the board of the Reserve Bank of India draft regulations to enable setting up of panels to oversee functions including financial stability, monetary policy transmission and foreign exchange management, the people said, asking not to be identified as the discussions are private.
The move is meant to empower the regulator’s board, which includes government nominees, and give it a supervisory role, the people said. The RBI board is scheduled to meet on Monday. The latest proposal may heighten tensions between the finance ministry and the RBI, which have been at loggerheads over a host of issues that will be discussed at Monday’s meeting including easing of bad loan norms and ensuring liquidity to the shadow banking sector. While the government says the central bank isn’t providing support to boost growth, the RBI says fund transfers could undermine its independence and hurt the markets.
