Govt Sends Letters to RBI Invoking Section 7 of RBI Act

Govt Sends Letters to RBI Invoking Section 7 of RBI Act

Govt Sends Letters to RBI Invoking Section 7 of RBI Act

"It is, therefore, appropriate that the bill may be withdrawn", then finance minister Piyush Goyal had informed the joint committee, which tabled its report on the controversial bill on 7 August 2018 in Parliament. How effective management is in controlling and monitoring credit risk can also have an effect on the what kind of credit rating can be achieved. But the specific warning within it goes beyond any current conditions and applies to any discussion about power struggles between governments and their central banks. India is gaining worldwide recognition as a leader in payment systems. "We firmly hold that undermining the central bank is a recipe for disaster and the government must desist", the All India Reserve Bank Employees Association said in a letter.

Public sector banks: Following the Nirav Modi-Punjab National Bank case, the RBI and Centre began pointing fingers at each other. This independence, he said, was necessary to secure greater financial and macroeconomic stability.

As mentioned in the report, Acharya's speech was only a strike in the long-running tug of war between the government and the RBI on whether the bank should part with some of its Rs 3.6 lakh crore reserves to fund the country's fiscal deficit. "Government of India has nurtured and respected this", it said in the statement.

According to a media report, the government has invoked the never-before-used powers under the RBI Act allowing it to issue directions to the central bank governor on matters of public interest. These letters were on the government's desire for power sector non-performing assets to be reclassified, the issue of the RBI giving dividends to the Centre, and the government's desire for the Prompt Corrective Action norms applicable for certain bank be eased so as to increase lending for the MSME sector, respectively.

The statement further stated that, "Government of India has never made public the subject matter of those consultations".

From the tone of Acharya's speech, it appeared that the RBI is under tremendous pressure to hand over its surpluses squirrelled away over years and hence its decision to take the issue to the people. The government, through these consultations, places its assessment on issues and suggests possible solutions. "But it is quite worrisome to see the government trying to continuously interfere into the RBI's operations".

The Finance Ministry on Wednesday acknowledged that the autonomy of the Reserve Bank of India (RBI) is an "essential and accepted governance requirement", but it neither confirmed nor denied that it had issued directives to the bank under Section 7 of the RBI Act. "There have been talks with the RBI on these issues, but invoking Section 7 (1) is something that has not come up yet but we need to also ensure that industries are not killed", he added. "It shows that government is hiding facts about the economy and is desperate (sic)", he said in a series of tweets.

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