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No disconnect between RBI and government: FM Jaitley

RBI-and-governmentScotching murmurs of differences between the government and the RBI over regulation of money market, Finance Minister Arun Jaitley on Sunday said there is no ‘disconnect’ between the two and hoped banks would follow the central bank in reducing interest rates.

Jaitley, who addressed the RBI board on his proposals in Budget for 2015-16, said there have been regular interactions and the government often takes opinion and suggestions of the central bank.

On the possibility of future interest rate cuts, RBI Governor Raghuram Rajan said it would depend on the pattern of inflation and added that the central bank would carefully watch the impact on unseasonal rains and hailstorm on the price situation.

“We have complete free and frank discussions and therefore there is no question of any disconnect… Between the bank and the government, I have repeatedly clarified that,” Jaitley told reporters after the meeting.

Jaitley in his budget had proposed to shift powers to regulate trading in government bonds from RBI to capital market regulator Sebi.

“As far as proposals in the Finance Bill are concerned they are before Parliament. Some of them we discussed earlier, we discussed them even now …I don’t wish to comment at this stage,” he said.

He further said that discussion between the government and the RBI always continues. “They
(discussions) have been before the budget and have taken place after the budget as well,” he said.

When asked whether banks would be pressurised to pass on rate cuts to consumers, Jaitley said the government doesn’t put pressure but hopes and it is hopeful that they would do it in line with the RBI policies. Jaitley said, “We do not put pressure on them. We only expect and our expectations come true.”

Despite RBI cutting short-term lending rates by 0.50 per cent in quick succession, banks have yet to reduce lending rates for borrowers.

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