Government Is Seeking Closer Supervision of Its Central Bank
India’s government has proposed changing rules that will enable closer supervision of its central bank, people with knowledge of the matter said, a move that may undermine investor confidence in the world’s fastest-growing major economy.
Prime Minister Narendra Modi’s administration has recommended that the board of the Reserve Bank of India draft regulations to enable setting up panels to oversee functions including financial stability, monetary-policy transmission and foreign-exchange management, the people said, asking not to be identified as the discussions are private..
The move is meant to empower the regulator’s board, which includes government nominees, and give it a supervisory role, the people said. The central bank’s board is scheduled to meet on Monday. The tension mirrors central bank fights playing out in countries as varied as the U.S. and Turkey, and is a symptom of what happens when an era of easy credit ends.