Topic Of The Day:-“Convention”
This is the framework of the law but what has been the convention till now? The RBI Board has always functioned in an advisory role with the understanding that the Governor would consider its advice while making policy decisions. In other words, there was mutual respect between the board and the Governor, with both operating in a spirit of accommodation.
The fact is that neither Section 7(1) nor Section 7(3) has been unleashed in the 83-year existence of the RBI. Not even when the RBI was privately owned between 1935 and 1949.
It is not as if there have not been any disagreements between RBI Governors and governments before this. You only have to read the memoirs of the former Governors, Y.V. Reddy and Duvvuri Subbarao, to understand the extent of meddling by the Centre in the RBI’s affairs. Yet, things did not reach the brink and were sorted out quietly behind the scenes.
Another former Governor, C. Rangarajan, has spoken about how the RBI, under Governor R.N. Malhotra, was forced by the Centre to withdraw a circular freeing short-term rates of banks. Yet, there was no chatter of invocation of Section 7 or of the board arming itself with governance powers.
What’s the difference between then and now? The short answer is that the spirit of accommodation, which flows out of mutual respect and understanding of each other’s compulsions between the RBI and the Centre, and which was evident then, is absent now. And the blame for this has to be shared by the players involved in the current tussle.
It may not be very difficult for the Centre to have its way by using the board’s powers to frame regulations overriding the Governor but this will necessarily come with a price. Such a move will not only set a badprecedent but also lead to several ticklish situations.
The RBI Board has several representatives from industry. The present board includes N. Chandrasekaran, Chairman of Tata Sons, Dilip Shanghvi, MD of Sun Pharma, and Manish Sabharwal, founder of Teamlease. There will be a conflict of interest if industrialists are members of committees that run the affairs of the monetary authority of the country (and we are not for a moment suggesting that they will behave in any manner favourable to their interests).
Second, there is a good reason why the RBI has been kept at arm’s length from the Centre and bestowedwith a certain independence. That is because the Centre is the spender and the RBI is the creator of money, and there has to be a natural separation between the two. The Centre arming itself with powers to run the RBI runs afoul of this precept.
Whichever way we look at it, such a move by the Centre would be ill-advised and will take its relations with the monetary authority into uncharted territory. There will be no winners in this dangerous game.
Enough dirty linen has been washed in public in the past month and it is time for the Centre and the RBI to behave like the mature entities that they are, uphold time-tested conventions, and act with mutual respect and a spirit of accommodation.
The board meeting today, November 19, will set a crucial precedent in the economic history of India, and one can only hope that it will be the right one.
MEANINGS AND WORDS
1) advisory
Meaning : having or consisting in the power to make recommendations but not to take action enforcing them(adj).
Synonyms : consultative
Antonyms : uninformative
Example : “the Commission acts in an advisory capacity”
2) leashed
Meaning : put a leash on (a dog).
Synonyms : bridled
Antonyms : loose
Example : “he called Azor to heel so that he could leash him”
3) memoirs
Meaning : an essay on a learned subject.(n)
Synonyms : reminiscence
Example : “an important memoir on Carboniferous crustacea”
4) meddling
Meaning : interfere in something that is not one’s concern.
Synonyms : interfering
Antonyms : careless
Example : “I don’t want him meddling in our affairs”
5) invocation
Meaning : the action of invoking someone or something.
Synonyms : supplication
Antonyms : curse
Example : “his invocation of the ancient powers of Callanish”
6) precedent
Meaning : an earlier event or action that is regarded as an example or guide to be considered in subsequent similar circumstances.
Synonyms : preceding
Antonyms : after
Example : “there are substantial precedents for using interactive media in training”
7) ticklish
Meaning : (of a situation or problem) difficult or tricky and requiring careful handling.
Synonyms : delicate
Antonyms : easy
Example : “her skill in evading ticklish questions”
8) bestowed
Meaning : confer or present (an honour, right, or gift).
Synonyms : granted
Example : “the office was bestowed on him by the monarch of this realm”
9) afoul
Meaning : into conflict or difficulty with.
Synonyms : amiss
Antonyms : untangled
Example : “with its sails afoul“
10) precept
Meaning : a general rule intended to regulate behaviour or thought.
Synonyms : dictum
Antonyms : ambiguity
Example : “the legal precept of being innocent until proven guilty”
11) linen
Meaning : cloth woven from flax.
Synonyms : fabric
Example : “a linen suit”
12) conventions
Meaning : a way in which something is usually done.
Synonyms : ceremony
Antonyms : disagreements
Example : “to attract the best patrons the movie houses had to ape the conventions and the standards of theatres”
13) conflict
Meaning : be incompatible or at variance; clash.
Synonyms : dispute
Antonyms : harmony
Example : “parents’ and children’s interests sometimes conflict”
14) consistent
Meaning : acting or done in the same way over time, especially so as to be fair or accurate.
Synonyms : persistent
Antonyms : irregular
Example : “the parents are being consistent and firm in their reactions”
15) corporate
Meaning : relating to a large company or group.
Synonyms : joint
Antonyms : particular
Example : “airlines are very keen on their corporate identity”
16) livestock
Meaning : farm animals regarded as an asset.
Synonyms : cattle
Example : “markets for the trading of livestock”
17) rehabilitation
Meaning : the action of restoring someone to health or normal life through training and therapy after imprisonment, addiction, or illness(n).
Synonyms : renewal
Antonyms : decay
Example : “she underwent rehabilitation and was walking within three weeks”
18) intervention
Meaning : the action or process of intervening.
Synonyms : interference
Antonyms : affront
Example : “a high degree of state intervention in the economy”
19) compensation
Meaning : something, typically money, awarded to someone in recognition of loss, suffering, or injury.
Synonyms : recompense
Antonyms : fine
Example : “he is seeking compensation for injuries suffered at work”
20) override
Meaning : use one’s authority to reject or cancel (a decision, view, etc.).
Synonyms : overrule
Antonyms : accept
Example : “the courts will ultimately override any objections”
21) concurrent
Meaning : existing, happening, or done at the same time.
Synonyms : simultaneous
Antonyms : vintage
Example : “there are three concurrent art fairs around the city”
