There is a larger mandate

Abstract

The composition of the Board of the Reserve Bank of India (RBI) represents the character of the institution – that it is not just a monetary authority, but that with a much larger mandate. The fact that monetary policy – a domain of the governor which was moved to a monetary policy committee – gives a framework of decision making on that function. But there are issues beyond monetary policy, given that the RBI is a full service central bank. Its mandate goes beyond covering banking regulation, currency management, foreign exchange management and also includes a developmental mandate. If we look back, we find that the RBI consistently had conflicting roles of being a player in the financial and financial services market, but also that of a regulator. It had managed these roles quite well, exiting from active participation and investments at an appropriate time. The theoretical composition of the RBI Board represents this larger mandate. The question therefore is about how effectively the current governance structure is functioning.

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