"Glad Government Acknowledged Independence Of RBI": P Chidambaram

Former Union finance minister P Chidambaram on Monday expressed happiness after the government "grudgingly acknowledged" the independence of the Reserve Bank of India.

"Glad that the Government has stepped back and grudgingly acknowledged the independence of the RBI," he said on Twitter.

"My guess is that the independent directors (at least most of them) realized that the government was on a perilous course and refused to go beyond giving advice to the RBI.

"There is no harm in a technical committee examining the issue of Reserves. At least the Reserves are safe until May 2019!," Mr Chidambaram tweeted.

Signalling a temporary truce, the Reserve Bank and the government Monday agreed to refer to an expert committee the contentious issue of appropriate size of reserves that the RBI must hold, while restructuring of stressed loans of small businesses would be considered by the central bank.

The setting up of the committee, whose members will be decided by the government and the RBI, followed a marathon nine-hour long meeting of the central board that discussed threadbare issues that had brought the central bank and the Finance Ministry at loggerheads.

"The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI," the central bank said in a statement.