Mumbai: As an unprecedented struggle spell between India's Reserve Bank (RBI) and the government, it is 18 members of the central bank who keep their next action plan – they are not only central banks and government agencies but also business executives, economists and activists.
The RBI Board is scheduled to meet next November 19 in the midst of an ongoing debate with the government on several fronts.
The public challenges of the RBI and government officials so far are the controversial issues how to handle the huge surplus that RBI has accumulated, how is it going to deal with dormant lenders and borrowers in the midst of a remaining loan crisis and what could be "public interest" for the government to dictate directions so that it is not seen as an attack on central bank independence.
According to the RBI website, its central board currently has 18 members, but the rule is that it can go up to 21.
The members include governor Urjit Patel and his four deputies as "full-time officials", while the remainder 13 have been appointed by the government, including two officials of the finance ministry finance secretary Subhash Chandra Garg and Finance Director Rajiv Kumar.
There is also Swadeshi ideologist Swaminathan Gurumurthy and co-operative banker Satish Marathe, nominated by the government as part-time non-official directors.
The entire board is appointed by the government under the RBI Act, which authorizes the central government with "general supervision and direction of the reserve bank's affairs".
The government may nominate 10 "non-official" board members from different fields and two government officials. The four non-official board members are each from RBI's four regional boards.
In addition to Patel, the four official directors N S Vishwanathan and Viral Acharya, both of whom have become public with their direct or indirect criticism of possible attempts to undermine RBI independence, such as B P Kanungo and M K Jain.
Patel became Governor in September 2016 after being Deputy Governor since January 2013. Previously, he had served at the International Monetary Fund (IMF) and was also deputizing from the IMF to the RBI in 1996-1997.
He was a consultant to the Ministry of Finance 1998-2001 and holds a doctorate in economics from Yale University, a M Phil from Oxford University and a BSc from the University of London.
Acharya is a New York University Professor of Economics, while Kanungo and Vishwanathan are career central banks. Jain was appointed Deputy Governor in June 2018 and led former IDBI Bank and Indian Bank, including professional banking roles.
Company executives on board
The directors of RBI's Board include Tata Group Manager Natarajan Chandrasekaran, former Mahindra group veteran Bharat Narotam Doshi, Teamlease Services co-founder Manish Sabharwal and Sun Pharma Director Dilip Shanghvi.
The other members are Sudhir Mankad (Senior IAS Officer, Last Mission of the Gujarat Government Secretary), Ashok Gulati (Agricultural Economist), Prasanna Mohanty (Ex-IAS Officer and Economist), Sachin Chaturvedi of Delhi-based Thinking Tank Research and Information System for Developing Countries (RIS) and Revathy Iyer (a former deputy chief jurist and auditor).
Previously, RBI's Board had several business leaders like Ratan Tata, Kumar Mangalam Birla, N.R. Narayana Murthy, Azim Premji, G.M. Rao, Y.C. Deveshwar and K.P. Singh.
Recently, the board member Nachiket Mor, who previously served as Executive Director of ICICI Bank, was short-circuited shortly after one year after being nominated by the government in August 2017 for a second period of four years.
The former Board members also include Kiran S Karnik, Y H Malegam, Ela Bhatt, V Rajeev Gowda, Suresh Tendulkar and Suresh Neotia.
The RBI was founded on April 1, 1935, and the appearance and position of the Board members is governed by Section 8 of the RBI Act.
Section 7 has recently been news, which states that "the central government may from time to time give such instructions to the bank as it may, after consulting the central bank manager, consider it necessary in the public interest".
"Subject to such instructions, the Bank's general conviction and direction shall be transferred to a central board that may exercise all powers and do all actions and things that may be exercised or executed by the Bank," Section 7 further states.
It is also provided that "unless otherwise provided in regulations made by the central government, the governor and in his absence, the Deputy Governor whom he nominated on his behalf also has powers of general conviction and direction of the affairs and activities of the Bank and may exercise all the powers and do all actions and things that can be exercised or executed by the bank ".
Although originally privately owned, since its nationalization in 1949, the reserve bank is wholly owned by the government of India.
RBI is empowered to "regulate the issue of banknotes and reservations with a view to securing monetary stability in India and generally to drive the country's currency and credit system to its advantage".
It is also necessary to "have a modern monetary policy framework to meet the challenge of an increasingly complex economy, in order to maintain price stability while taking into account the target of growth.