1. Unromantic Love between Central Banks & Governments

2. WHAT IS CENTRAL BANK?
The independent national institution responsible for printing and distribution of money and credit.
It controls the commercial banking operations of any economy
Provides Banking and Financial Services to the government
It is responsible for the monetary policy formulation and implementation
GOALS
Control Inflation
Keep Unemployment rate low
Stabilise the nation’s currency

3. HISTORY OF CENTRAL BANKS
Sveriges Riksbank, the first central bank was established in 1668.
Few decades later, in 1694, the most popular central bank came into existence, Bank of England.
Central Banks were lenders to the government who funded the government objectives.
Default of monarchs or government led to falling credibility of authorities and failure of financial systems.
This system allowed to stabilise currency, borrow at lower rates to flourish the economy.
In 19th century, capitalism plagued with financial panics reducing creditworthiness of private banks.
This system was being accepted widely by different countries by pegging currency and gold
In 1907, USA again hit with another crisis known as KnickerBocker Crisis resolving it led to creation of US Fed in 1913.

4. MAJOR CENTRAL BANKS ACROSS WORLD
Federal Reserve System
European Central Bank
People’s Bank of China
Bank of Japan
Bank of England
Reserve Bank of India
Banco Central do Brasil
Bank of Canada
Central Bank of Russia
Reserve Bank of Australia

5. RELATIONSHIP BETWEEN CENTRAL BANKS AND GOVERNMENT
One common objective for both of them is economic development and well-being of the nation.
Government plays a key role in facilitating the development prospects by building required infrastructure and supporting through various aids.
The central bank acts as the lender of last resort for funds, especially for developing nations which have lingering deficits.
Central Bank, though independent and legal monopoly, is under the purview of government in one or other form.
They mutually respect their domains and try to sustain the growth of economy.

6. THE UNROMANTIC LOVE! Democratic setup & Political Reasons
Most of the leading nations elect their governments democratically. So, ruling authorities have to prove themselves being a better option.
Central bank’s mandate is to curb inflation rates and keep economy under control.

7. INDIAN CENTRAL BANK - RBI
Founded on April 1st under RBI Act, 1934.
Nationalised in 1949, since then completely owned by Government of India.
Preamble of RBI states its basic functions.
1. Monetary Supply Keep reserves for monetary stability Operate the currency and credit system
During , banks crashed which led to nationalising of many banks. RBI played a key role in controlling and supporting these banks.
Further nationalisation of banks increased the regulation power of RBI over banks and became a bigger player in the economic development of India
Post LPG, need for private banking sector emerged leading to setup in 1993.

8. AUTONOMY OF RBI It can be looked into as 4 phases
Pre Independence ( )
Post Independence ( )
Nationalisation ( )
Economic Liberalisation ( )

9. IN THE LAST DECADE..
Setting up of Financial Stability and Development Council
RBI Governor Subbarao & Fin Min Chidambaram. Push to reduce repo rates
Recommendations by Financial Services Legislative Reforms Commission
2016 -
Technical Advisory Committee replaced by Monetary Policy Committee, RBI Guv doesnt have veto power.
Financial Sector Search and Recruitment Committee, headed by Cabinet Secretary
Tried to separate debt management function from RBI, though not implemented
Proposal for FRDI bill
Expansion of FSDC members to 8 out of 12
Separation of Payment Regulatory Authority headed by bureaucratic chairmanship

10. RECENT TUSSLE RBI Governor Urjit Patel resigns. Why?
Government and RBI were in a great battle. The government was fierceful in pushing its recommendations.
Easing norms of PCA to increase the credit lending capacity of 11 PSBs which are under PCA
Threat to invoke section - 7 of the RBI Act
Transfer of excess capital reserves with RBI to Government
9.59 lakh crores, which is 28% of its total assets in contrast to the global average of 16%.
The negotiations ended up in a temporary respite and with some wounds for RBI

11. Thankyou - K A Bharadwaj