Unintended consequences?

The Reserve Bank of India (RBI) seems to have decided, somewhat belatedly, to fight for its own autonomy. Well, it’s better late than never, and there is much to recommend in the suggestion by RBI to the finance ministry that it allow an ordinance issued last month to lapse at the end of the forthcoming monsoon session of Parliament. The ordinance gave statutory powers to a new committee of financial sector regulators and ministry officials, chaired by the finance minister. The government issued the ordinance over a week-end, and (it would now seem) without prior consultation. In doing so, it set up a system that erodes the autonomy of RBI, which, other than being the regulator of the banking system, is also the country’s monetary authority. Chipping away at RBI autonomy may not have been the intention, but if a law on this is enacted to take the place of the ordinance, that will become the fact.