Jaitley tries to soothe frayed nerves over IFC

Facing flak for the revised draft of the Indian Financial Code (IFC) that had proposed reducing the Reserve Bank of India's (RBI) powers to set interest rates, the government said on Monday that it would consult stakeholders, including the Central bank, before firming its views.

Union finance minister Arun Jaitley clarified to reporters that said it is only after comments of various stakeholders are received that the government would take a view on the revised draft, which favours creation of a committee to set interest rates where a majority of its seven members are nominated by the government.

"FSLRC (Financial Sector Legislative Reforms Commission) has made its recommendations which have beenmade public for comments. After the comments are received, it is only then that the government will take a view," Jaitley told the media. Chief economic adviser Arvind Subramanian has already dubbed the IFC draft as merely FSLRC.

The revised draft of IFC, released by the ministry last week, is based on recommendations of FSLRC, headed by Justice B.N. Srikrishna.

The previous version of the draft Bill called for a seven member committee, including two RBI officials, three government appointees and two members picked jointly by the ministry and the Central bank governor. It also gave the governor a veto over decisions. At present, the RBI governor consults a Technical Advisory Committee, but does not necessarily go by the majority opinion while deciding on the monetary policy stance. The revised draft does not confer the veto power on the governor.

RBI governor Raghuram Rajan had met Prime Minister Narendra Modi on Friday and discussed the revised FSLRC code among various other issues.