RBI’s Autonomy Is Fundamental, We Have To Maintain It: Bimal Jalan

A day after former RBI governor YV Reddy flagged 'reputational risk' being faced by the central bank, another former governor Bimal Jalan on Tuesday said its autonomy is fundamental and needs to be maintained.

"The autonomy of the RBI -- that is a very fundamental fact and we have to maintain it and I hope the government would give attention to that part also," Jalan said in an interview to business news channel CNBC-TV18.

Reddy regretted on Monday that the institutional identity of Reserve Bank of India has been damaged and stressed that for central bank "reputational risk is worst risk".

Jalan said one would have to wait and see how the relationship between the government and RBI develops which ultimately is a matter of coordination.

Jalan was RBI Governor from 1997 to 2003 and was succeeded by Reddy.

On the impact of demonetisation on growth, he said, "It is very difficult to go through the percentage points...but everybody agrees that there would be a decline in the rate of growth. How far it is due to demonetisation and how far it is the trend from 7.6 to 7.1, you have seen last year itself...Let us wait and see that is the best thing rather than forecasting at the moment."

When asked whether he would have advised the government to take such a big step, Jalan said: "It is a decision and whether a decision is right or wrong that can only be proved over a period of time. If the black money reduces, if the corruption reduces, certainly it is a worthwhile step although it has pained the not so well-of classes more." However, he added that if the demonetisation decision leads to further administrative reforms, it would be a major gain.

The government had scrapped high value currency notes of Rs 500 and Rs 1,000 from the midnight of November 8.