ibusinesslines.com
ibusinesslines.com November 14, 2018


Modi Government Said To Cite Never-Used Powers In Talks With RBI

31 October 2018, 10:48 | Kelvin Horton

Explainer: Why the RBI and the central government are in a public spat

RBI vs Government: Urjit Patel may resign as governor after Centre invokes never-used powers

On October 27, Finance Minister Arun Jaitley said, "I think, for any regulatory mechanism, stakeholder consultation has to be of a very high quality, which will probably lead to a revisiting of traditional thoughts and opinions". But the government had decided against using this provision at that time. While there are reports suggesting that the Centre has already invoked Section 7 of RBI Act, it still remains unclear on how it will be used.

The government has invoked never-before-used powers under the RBI Act that allow it to issue directions to the central bank governor on matters of public interest, the Economic Times newspaper reported.

In open letter, All India Reserve Bank Employees Association says govt must desist from nibbling at central bank's autonomy and let it do its job in an unfettered way, else it will incur the wrath of financial markets.

It, however, underlined that both the government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy. RBI and the government have reportedly been at the loggerheads over several issues including the government demanding ease in lending rules for at least 11 banks under prompt corrective action (PCA) framework, while the regulator thinks otherwise. "For the objective, extensive consultations on several issues take place between the Government and the RBI from time to time", it added.


The latest development follows a Friday speech by Deputy Governor Viral Acharya warning of the risks of political leaders encroaching on the central bank's independence.

This section has never been invoked in the history of independent India despite numerous clashes between the government and the RBI over the years. However, they added, there has been no talk of invoking Section 7 (1).

Government officials said they were surprised that Patel, who was appointed by the Modi administration in 2016 and initially cooperated with the government, is creating tension when the Centre is facing criticism over its handling of the economy before the 2019 General Elections. Reserve Bank case emphasising that "the Reserve Bank, apart from it being a reasonable body, is answerable to the Central Government, and the public opinion is certainly strong and vocal enough for it to heed". The official said Patel may face a tough time when he appears before a parliamentary standing committee on November 12. According to ET Now, Patel had told government not to "raid RBI reserves", as government was keen on the transfer of reserves to fill up its fiscal deficit amid NPA stress. "The government respects the autonomy and independence of the RBI but they must understand their responsibility", the official added.



Other News

Trending Now

Google Pixel 3 XL gets horrifying second notch thanks to weird glitch
If one large notch on your Pixel 3 XL wasn't enough, your phone might randomly choose to grow a second , virtual one. In developer mode, users can also add notches to the right-hand top of the screen and the bottom of the screen.

Jamal Khashoggi's fiancee calls on Saudi Arabia to explain his murder
Later, Riyadh said the killing was premeditated and Crown Prince Mohammed has vowed that the killers would be brought to justice. Cengiz said she had not been contacted by Crown Prince Mohammed or the Saudi Royal family, nor offered any condolences by them.

Leicester City owner's family lay wreaths after deadly helicopter crash
Guardiola hailed City's Champions League win over Shakhtar Donetsk last week as the finest display of his reign in Manchester. He did a lot for me and for Leicester.

Former coach Lehmann calls for Smith, Warner bans to be reviewed
The review made 42 recommendations to change CA's culture, most of which the organisation said they would either look to implement or already had in place.

Trump loads up on rallies before Election Day
According to the Trump campaign, Trump has headlined 70 fundraising events since the start of his administration. McCaskill is a top target for Republicans seeking to expand the party's slim 51-49 edge in the U.S.

Merkel Will Step Down As Chancellor In 2021
Merkel has been CDU chairwoman since 2000 and giving up the role would start a race within the party to succeed her as chancellor. The AfD party secured 12% of the vote in Hesse and is now represented in every state parliament as well as in the Bundestag .

Lewis Hamilton on cusp of fifth title - and he has earned it
Ferrari admitted to a wrong development turn in Singapore which at first needed to be understood and then corrected. Reflecting in the Mexico paddock this week, Fernando Alonso said Vettel's spins look more like co-incidence to him.