New Delhi, Jan 4: Former Finance Minister P Chidambaram on Wednesday said that the government has virtually taken over the Reserve Bank of India’s (RBI) role.
He said that this is because Prime Minister Narendra Modi has announced everything with regard to demonetization and rate cuts by banks.
Chidambaram, in an interview, said that “Virtually, the government has taken over RBI’s function and the central bank is stunned into silence. Tomorrow the government will stipulate who will get a loan and who will not.”
“The credibility took a further hit when the Prime Minister on December 31 announced that banks will reduce interest rates, working capital limits will be increased, cash credit will be increased. This was on Saturday and Sunday evening, the State Bank of India (SBI) announced a rate cut,” he said.
He noted that demonetization is the prime example which shows how RBI gave up in front of the government and compromising its autonomy.
“If RBI was pulling out Rs 15.40 lakh crore from circulation, it should have told the government that they quickly need to remonetize the economy. If not Rs 15.40 lakh crore, but at least Rs 10 20 lakh crore. But apparently they did not as the agenda of the board meet did not disclose these numbers. That’s why they are reluctant to disclose the minutes of the meeting,” Chidambaram said.
Chidambaram said that demonetization was a pre-scripted performance by the government where everyone was asked to play its role. “We need to know if, in the RBI board meeting, there was any dissent,” he added.
RBI, in response to an RTI plea, has refused to reveal the minutes of the board meeting wherein demonetization was discussed saying it will compromise the security of the nation and the people.
Chidambaram said that no earlier RBI Governor had thought that demonetization would turn around the economy.
“Now we have a governor, who after 64-65 days of assuming office, is suddenly saying that demonetization is the way to turn around the economy, given the turbulence in the world economy. Why did they hit upon the completely disruptive move? Nobody has been able to justify the move, nor the Prime Minister nor the RBI governor,” he added.