A day before demitting office, Reserve Bank Governor Raghuram Rajan today said the RBI's ability to say 'no' to highest echelons of government has to be protected as the country needs a strong and independent central bank.
Delivering a lecture on 'independence of the central bank' at the St Stephens College in New Delhi, the outgoing governor said the central bank cannot be free of all constraints as it has to work under a framework set by the government.
Recalling his predecessor D Subbarao's comments on policy differences with the government, Rajan said he "would go a little further" as he believes that "the Reserve Bank cannot just exist, its ability to say 'no' has to be protected."
"In this environment, where the central bank has to occasionally stand firm against the highest echelons of central and state governments, recall the words of my predecessor, Dr. Subbarao, when he said "I do hope the Finance Minister will one day say, 'I am often frustrated by the Reserve Bank, so frustrated that I want to go for a walk, even if I have to walk alone. But thank God, the Reserve Bank exists," the outgoing RBI governor said.
He further said that freedom to take operational decisions is important for the central bank.
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