The board of directors of RBI should aim to look like Rahul Dravid, not Navjot Singh Sidhu: Raghuram Rajan

New Delhi: In the midst of the public quarrel between the Center and the Reserve Bank of India, Raghuram Rajan said Tuesday that the RBI was like a seatbelt, without which you could have an accident.

S addressing exclusively to CNBC-TV18, Rajan, a former RBI governor, reaffirmed the importance of the apex bank and said that it should be protected as a national institution. and that unhealthy disagreements between the Union Finance Ministry and the RBI should not get worse.

"Once you have appointed a governor or vice-governor, you must listen to them," said Rajan, adding that he congratulated Viral Acharya for the warning that he was pleading in favor of Autonomy of RBI.
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Rajan said that the current division between the Ministry of Finance and the RBI can be resolved if both parties respect the intentions of the other.
The central bank has the freedom to say no if the government is pushing it to show clemency, said Rajan, "the government should plead its case in front of the bank and let the RBI decide."

Regarding the role of the RBI's board of directors, he stated that his role has not always been to make operational decisions, but to focus on a broader strategy and strategy. 39, ensure good governance.

"They are there to ensure that the government money is well spent in the RBI, for example, the RBI does not pay excessive salaries, etc., but also to act as a sounding board, which explains why we have people of different personalities very prominent, "he said.

"So I think the purpose of the board is to protect the institution, not to serve the interests of others, it is to protect the health of the institution but also to Providing judicious and varied advice.The purpose of the council is to be Rahul Dravid – sensitive, thoughtful and not, with all due respect, Navjot Sidhu, "he said.

The territorial war between the RBI and the Center over the autonomy of the central bank has been open since last week.

The new series of exchanges began with a speech by one of RBI's four Deputy Governors, Viral Acharya. He pleaded for the central bank's independence in its core functions and only gave a lecture on what would happen to the economy if the autonomy of the RBI was compromised.

"The risks of undermining the independence of the central bank are potentially catastrophic," Acharya said.

"Governments that do not respect the independence of the central bank will sooner or later face the wrath of financial markets, fan the flames of the economy and abandon the day they undermine an important regulatory institution ", he added.

Senior officials and political leaders of Delhi's power corridors have duly responded to the distress call from the central bank. According to a report from Reuters, the government is "very unhappy" with Acharya's public statements.

Finance Minister Arun Jaitley has tacitly opposed Acharya without taking any names, saying regulators should revisit their traditional approach and consult with more stakeholders. "I think that for any regulatory mechanism, stakeholder consultation must be of a very high quality, which will probably lead to a revision of traditional thoughts and opinions," said Jaitley.

Rajan also said that India was in a much better position in terms of inflation and that the government and the RBI should be duly credited to keep inflation at a low level.

The country is growing faster than most other countries, said Rajan, raising concerns about the soaring current account deficit (DAC).

The former chief economist of the International Monetary Fund said that, worldwide, monetary policy should tighten in the future.

On rising US federal reserve rates, Rajan said the US enjoyed substantial fiscal stimulus, adding that data on US employment would determine whether the Fed would continue to raise rates.

The former governor of the RBI expects the Fed to raise its rates only once this year and three times next year. However, strong US growth may not last as the Fed continues to tighten rates.

The EU's central bank will also end its quantitative easing by the end of the year, he added.