The employee union of
the Reserve Bank of India (RBI) has urged the bank's governor to protect
central bank autonomy and not allow the federal government to interfere in
processes following criticism over how it handled a ban on high-value currency.
The bank
and Prime Minister Narendra Modi have been criticized for the implementation of
their November decision to abolish high-value bills that accounted for 86
percent of currency in circulation.
Economists said slow
replacement of the bills undermined the RBI's reputation for competence, while
some raised doubts about the bank's independence for agreeing to implementation
with limited preparation.
The RBI's employee union in a letter to the
governor dated Jan. 13 said it was "painful" the central bank was
being criticized despite its staff successfully carrying out the
"humongous task" of replacing the old bills.
It cited a recent local media report saying
the finance ministry had sent a bureaucrat to coordinate the bank's cash
operations.
"If true, this is most unfortunate and
we take strong exception to this measure of the government as impinging on RBI
autonomy," the union said in the letter. The RBI did not require any
assistance, it said.
"Apart from showing RBI operations and
its gigantic performance in poor light, the government now blatantly encroaches
on its jurisdiction," the union said in the letter, a copy of which was
seen by Reuters.
An RBI union member confirmed the
authenticity of the letter. The RBI did not provide an immediate comment. The
finance ministry in a statement said the government "fully respects"
the independence and autonomy of the RBI.
"Consultations mandated by law or as
evolved by practice should not be taken as infringement of autonomy of
RBI," the ministry said.
Modi's decision on Nov. 8 to suddenly scrap
500 and 1,000 rupee banknotes as part of a crackdown on tax dodgers and
counterfeiters has resulted in severe cash shortages, impacting companies,
farmers and households alike.
The action has
also drawn political concern, with some people in Modi's own party anxious that
the cash crunch could hurt their prospects in states holding elections this
year.
One RBI official involved in drafting the
union's letter said employees were worried that government intervention in
distributing new bills could be politically influenced ahead of state polls.
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