The central board of Reserve Bank of India (RBI) has opposed a government move to have control over the central bank's staff-related matters.
The proposal to make staff regulations statutory and bring them under the subordinate regulation of Parliament was discussed at RBI's board meeting in Kolkata last week.
According to sources, RBI Governor D Subbarao mooted the proposal during the board meeting. But three board members and a few executive directors opposed it on the grounds that it would affect RBI's independent functioning.
The central bank would have to take the government's approval on issues like salary, service conditions, promotions and incentives of its employees.
Sources said following the opposition, the proposal has now been deferred. It is highly unusual for a proposal to meet with stiff resistance from RBI board members.
The government has been putting pressure on RBI to make staff regulations statutory under Section 58 of the RBI Act, 1.34, and bring them under the subordinate legislation of Parliament.
The central board of RBI consists of the governor, all deputy governors and representatives from industry and government.
At present, the government nominee on RBI's board is Finance Secretary Ashok Chawla. Executive directors are not board members, but are invitees to the meeting.
Recently, the government had asked RBI to take its approval before finalising central bank employees' pay hikes, which the regulator had not initially agreed to.
Later, the central bank agreed to 'brief' the finance ministry about the pay revision, but said it would not seek approval.
During the year, there were at least two instances when the government's actions prompted Subbarao to highlight the importance of RBI's autonomy and independence.
The first was over the ministry's decision to refer all regulatory disputes on hybrid financial products to a committee headed by the finance minister.
Later, RBI also expressed concern about the proposed Financial Stability & Development Council and said financial stability should be the exclusive mandate of the central bank.
