RBI facing reputational damage warns ex-governor

Former Reserve Bank of India governor VY Reddy has said there is a "lack of clarity" over the central bank's role, confusion which he said had damaged its "institutional identity". Reddy, who spent 11 years as deputy governor and governor, said there was more to the RBI's functions than simply being a regulator, and called for a cross-party, national debate on the issue. Reddy also criticised the use of demonetisation to crack down on so-called "black money", and said: "it is a bigger problem".

Former RBI Governor YV Reddy. (File Photo) Former RBI Governor YV Reddy. (File Photo)

Former Governor V Y Reddy today said that RBI is facing ‘reputational’ risk and its identity as an institution has been damaged. He also opined that the problem of black money cannot be eliminated only by destroying cash through demonetisation. “There is a confusion (about the role of RBI) at philosophical level. There are two types of confusions. To be very frank, my own frustration is that the institutional identity of RBI has been damaged,” Reddy said in an interview to CNBC TV18.

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Reddy, who served RBI for 11 years as deputy Governor and Governor, regretted the fact that RBI is being treated just as a regulator although regulation is only one of the functions of the central bank.