New Delhi: The Modi government plans on proposing rules that will enhance the power of the Reserve Bank of India’s central board, a move that may open the door to greater government supervision, according to media reports.

According to Bloomberg, the finance ministry has recommended that the central bank’s board set up panels to “oversee functions including financial stability, monetary-policy transmission and foreign-exchange management”.

The RBI’s central board has, throughout its history, never been a decision-making body.

It usually advises and guides the regulator, and leaves most of the decision-making to the RBI governor and his colleagues.

The board currently has 18 members, with five people from the central bank (the governor and his four deputy governors). The other 13 members include two government representatives, seven government-appointed non-official directors and four more from the central bank’s local boards.

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If the Modi government plans on going through with this change, banking sources tell The Wire, it will move the central board from being an advisory forum to playing a more sharp supervisory role.

“The recommendations being considered include setting up several committees comprising two to three board members each. The body has the powers to frame rules under section 58 of the Reserve Bank of India Act, 1934, and no legislative change is required,” the Bloomberg report noted, quoting unidentified sources.

In remarks made to CNBC-TV18, senior Congress leader Veerappa Moily, who also serves as the chairman of the parliamentary panel on finance, described the proposed move as an “assault on the RBI’s independence”.

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