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RBI Autonomy in Historical Perspective
Letters Autonomy of the central bank has been a recurring theme in the literature on monetary policy and central banks. However, the exact relationship between a central bank and the government in any country is also determined by the historical circumstances as well as the practices that have developed over time. Long before the Hilton-Young Commission’s recommendation in 1926 about the creation of the central bank, the Chamberlain Commission in 1914 included in its report a comprehensive memorandum by John Maynard Keynes, one of the members, which proposed that the three presidency banks should be amalgamated into one central bank to be called the Imperial Bank of India, which would undertake the functions now generally associated with central banks. The Imperial Bank Act was passed in 1920 on the general lines of the Keynes’ memorandum. The seed of a central banking institution for India was planted at the same time. However, the underlying intention that the Imperial Bank should gradually take over the currency and other central banking functions could not be fulfilled, mainly because of its dominating commercial functions. It is good to note that the Hilton-Young Commission took the line that an entirely separate institution should be created, to be called RBI, and that the Imperial Bank should be more completely commercialised and should merely operate as the agent of the RBI for the routine management of the government accounts. That it took nine years for this new line of approach to reach its goal was due to more than one reason. Attached to the report of the Hilton-Young Commission was a minute of dissent from an influential Indian member whose views in economic and monetary affairs commanded and recommended the gradual evolution of the Imperial Bank on the central banking line. Government circles also had reservations about the question of the controlling authority of the new institution. The Hilton-Young Commission advocated private shareholding and that the shareholders of the Imperial Bank get first opportunity to subscribe to the capital stock of the new bank. The government did not accept the suggestion and implicitly advocated a state bank. However, socio-political issues extended the debate. The report of the Central Banking Enquiry Committee, 1931 laid strong emphasis on the early establishment of a reserve bank, and in 1933, in the round table discussions, the scheme for the creation of a reserve bank was again brought forward, but from a new standpoint. The question at issue was that of transferring financial responsibility at the centre to an executive responsible to the legislature, and it was thought by government sponsors of the scheme that if a body of shareholders should be created, they would produce a directorate which would operate as an internal safeguard against any rash financial or currency experiments. (Continued on p 660) In the article ‘In Chhattisgarh, a River Becomes Private Property’ in this issue, in the first column, at the end of the first para, on p 612, the sentence “A decision was taken to the effect that of the total loss of Rs 9 crore…” should have read as “A decision was taken to the effect that of the total cost of Rs 9 crore...” Inland (Rs) Six One Two Three months year years years Institutions – 1250 2300 3300 Individuals 500 935 1750 2500 Concessional Rates Teachers/Researchers – 685 – 1800 Students – 450 – – Concessional rates are available only in India. To avail of concessional rates, certificate from relevant institution is essential. Remittance by money order/bank draft preferred. Please add Rs 35 to outstation cheques towards bank collection charges. Institutions – 1500 – 4150 Individuals – 1250 – 3500 (US $) Air Mail Surface Mail Institutions 1yr 2yrs 3yrs 1yr 2yrs 3yrs Sri Lanka, Pakistan and Bangladesh 80 150 200 65 120 175 Other countries 150 275 375 90 170 240 Individuals Sri Lanka, Pakistan and Bangladesh 50 90 125 30 50 75 Other countries 100 175 240 65 120 170 All remittances to: Economic and Political Weekly Hitkari House, 284 Shahid Bhagatsingh Road,
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Director : S L Shetty Economic and Political Weekly February 18, 2006 It is interesting to note that the share capital was to be entirely owned by private shareholders. Official control was limited to the appointment by the central government of the governor and two deputy governors after consideration of the recommendations made by the central board in that behalf. There was a provision in the public interest that the government be empowered to check the central board in case of failure to meet its statutory obligations. The spirit behind the creation of the RBI was the advocacy of functional autonomy of the central bank. TAPAS KUMAR CHAKRABARTY Mumbai I agree that there is an urgent need for making all publicly funded research reports available for free online access. It is equally important for other private funded research reports to be made available, at least for reference work. This is very much essential for healthy research to continue in the country. V Srinivasan’s initiative for hosting a web library may be a good platform for information seekers. However, there are already many web/internet libraries available on the net in the public domain. They have failed to integrate all the digital information available internationally. Recently, the government of India came out with a plan to create a national digital library. Let us hope that this proposal will fructify. AMAN KUMAR JHA Gurgaon Here are some guidelines fortake up to six to eight months from the address, day-time phone numbers andauthors who wish to make date of acceptance to appear in the email address. submissions to the journal. EPW. Every effort will, however, be made (The email address of writers in the to ensure early publication. Papers with Special Article, Commentary and immediate relevance for policy would be Discussion sections will be published atEPW welcomes original research papers considered for early publication. Please the end of the article.) in any of the social sciences. note that this is a matter of editorial * Authors are requested to prepare their * Articles must be no more than 8,000 judgment. soft copy versions in text formats. PDF versions are not accepted by the EPW. Authors are encouraged to use UKbe processed. EPW invites short contributions to the English spellings (Writers using MS Word version, we would appreciate a copy of references, minor changes, etc, as this along with the submitted paper. this poses challenges in processing. * Graphs and charts prepared in MS Readers of EPW are encouraged to send * All submissions will be acknowledged Office (Word/Excel) or equivalent comments and suggestions (300-400 words) immediately on receipt with a referenceon published articles to the Letters column. number. Quoting the reference number software are preferable to material All letters should have the writer’s full name in inquiries will help. prepared in jpeg or other formats. and postal address. * Every effort is taken to complete early * EPW posts all published articles on its web site and may reproduce them on CDs. processing of the papers we receive. Since we receive more than 35 articles Address for communication: EPW encourages researchers to comment every week and adequate time has to be Economic and Political Weekly, on Special Articles. Submissions should be provided for internal reading and external Hitkari House, 1,000 to 2,000 words. refereeing. It can take up to four 284 Shahid Bhagatsingh Road,
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