Reddy was also critical of the way Governor and Deputy Governors is selected.
Mumbai: Former Reserve Bank Governor YV Reddy on Monday said: “The role of central bank in our economy is under threat and it is a national problem which has to be addressed as a national problem”. In an interview to CNBC-TV18 channel, the former Governor also said, “my own suspicion is that the institutional identity of the RBI has been damaged.”
“I would even go to the extent of saying that particularly recent events, I have seen the comments from economists, from Standard and Poor’s and they are disturbing. For the RBI, for a central bank, reputational risk is the worst risk. Credibility is the worst risk. And if this is happening in the international opinion, I would say that it is a national problem now and it is not just a political issue,” Reddy said.
“I think it is time, it is like army which is the security of the country, the financial and monetary security of the country. So, there should be a debate at this juncture given the type of comments internationally cutting across political parties that what should be the nature of central bank and what it should be and how it should be run,” Reddy said.
“The question is that there is a problem of reputation and the reputation cannot be ascribed entirely to individuals. There has been institutional changes and procedural changes which have created confusion about the identity itself and effectiveness and therefore, the reputation. Now, what should be the new structure?” he asked. “There should be better clarity about the new structure. The old framework, whatever the background, which committee, which commission, which judge produced it, we need not go into it. The limited point is, the role of central bank in our economy is under threat and it is a national problem which has to be addressed as a national problem.”
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