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 To paraphrase yet again the much paraphrased Churchillian World War II tribute to the Royal Air Force, never, in independent India, has so much been owed by so many to so few. Home loans, the most extraordinary example in India of democratising prosperity, will become even tougher to repay as RBI squeezed credit again on Tuesday evening; all bank interest rates, including those on home loans, are set to increase once more.

“Endless Monthly Instalments”, this newspaper’s ongoing reportage series on how high home loan rates are affecting Indians who underwrote the post-reforms India story, can carry on endlessly. Because home loans are the reason monetary policy has descended from its perch of macroeconomic esoterica and entered living rooms. They are the reason the one thing Prime Minister Manmohan Singh apparently can do more or less by himself — appoint the next RBI governor — must be preceded by some serious thinking, on RBI.

Yaga Venugopal Reddy, the current RBI governor, demits office on September 6. The pink press is already carrying commentary/speculation on the shortlist of candidates who can replace Reddy. In a clear and well-informed commentary in Mint (June 23), Tamal Bandyopadhyay put down the pros and the cons of, and corridors-of-power concerns about, the informally shortlisted candidates: RBI’s deputy governor, the Union finance secretary and the deputy chairperson of the planning commission. Your correspondent has no special insight into who’s closest to getting the job or whether there’s a surprise candidate. But we do have an argument legitimised by the apprehension that monthly home loan statements have come to represent for millions of Indians: the next RBI governor must walk into a different RBI.

A small summary of monetary policy analyses is necessary before expanding this argument. As some of the commentators in The Indian Express and The Financial Express — Ila Patnaik, Bibek Debroy, Ajay Shah, Jaithirth Rao, Saugata Bhattacharya — have been arguing, consistently and sharply, that while it is no one’s case that inflation is good news, agreeing with RBI’s inflation management is bad economics.

The following points can be distilled from these analyses. First, central banks don’t have oracular powers. Second, we need to question why RBI isn’t more transparent about its non-headline making monetary policy interventions. Third, we need to ask whether RBI acted at the right time and in the right manner in fighting inflation. Fourth, because of the first three, the economy has sacrificed much more by way of interest rate increases, and therefore growth potential, at a time India appeared close to upgrading its medium-term growth trend.

In terms of home loans, these points can be distilled further into asking why so many Indians have been saddled with higher repayment obligations that would have been at least partly avoidable had RBI acted differently and why so many more potential home loan customers than is necessary are getting priced out.

RBI has to change because these are economic analysis-backed simple questions asked by simple people. We should either have an RBI that doesn’t engender such questions or an RBI that can be asked such questions via clear institutional means. The issue has never come up with this much force since the British colonial establishment appointed Sir Osborne Smith as RBI’s first chief in April 1935. But one little-recognised fallout of economic reforms has been the expansion of the scope of public inquiry into policy-making.

RBI’s been out of it so far in part because when Reddy took over, the central bank could boast, if it was so inclined, that interest rates were at a three-decade low. Bimal Jalan had finished a six-year term that engendered the home loan near-revolution. If RBI had been only doing what was necessary and unavoidable, its role may still have escaped public scrutiny, no matter the pain. But the central bank’s avoidable and costly judgment calls during Reddy’s tenure are directly related to the way it functions.

Hence the need to look at RBI now. The former RBI governor (September 1982 to January 1985) who’s now prime minister must give this imperative the weight it deserves. He can appoint the next governor but he can also initiate the process of taking a close look at RBI. This, Manmohan Singh can do without fearing interference from Marxists, regional parties, cabinet colleagues and Congress grandees claiming closeness to10 Janpath. The subject is not political enough in the de jure sense to attract “pro-people” spoilers. But, thanks mostly to home loans, RBI’s role is de facto a people issue. So it is easier to spin, and god knows the PM needs some positive spin. As an economist and an ex-RBI governor, Singh will bring special credibility in personally backing a reform of RBI.

Plus, and this is crucial, the intellectual ground is prepared for beginning a formal official reappraisal of the central bank.

There’s the officially commissioned Raghuram Rajan report that asks for RBI’s mandate to be defined in terms of inflation control. There are differently aligned but credible arguments on whether the policy-making establishment should arrive at a more sophisticated understanding of the growth-inflation trade off, recognising that for India to grow at rapid clip now is the most important public policy goal. There are equally credible arguments that some of RBI’s problems are the government’s fault; the executive has dumped too much on the central bank. There’s a report authored by Vijay Kelkar that argues, among other things, that some of RBI’s functions should be hived off. There’s no consensus on the big and small details of how a different RBI should look. But there’s an intellectual consensus and a need derived from ordinary people’s experiences — this is a rare meeting between these two strands of public debate — that RBI should look different.

Should the PM take authorship of this reform he can be sure that whatever happens in the rest of his term, he will leave a legacy that survives scrutiny. He may be judged as the economist-PM who had to forget reforms, a foreign policy-PM who had to forgo the nuclear deal. But he will be remembered as the ex-RBI governor-PM who understood — and here’s the spin — what RBI must stand for: Reserve Bank for Indians.