Former Governor V Y Reddy on Monday 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 a private news channel.
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.
“The RBI is a monetary authority. Yes but it is full service central bank ... It was incharge of many other things.
The recent emphasis appeared as though the monetary policy is the main function. Governor is accountable to monetary policy.