Sakshi Batra in conversation with Gaurav Choudhury, Deputy Executive Editor, Moneycontrol finds out what could be the macro implications of this rift.
The row between the government and the Reserve Bank of India were seen to be intensifying as reports suggested the government has invoked Section 7 of the RBI Act, which allows it to issue directions to the governor of the central bank in matters adhering to the public interest.
The Centre has reportedly sent letters to RBI governor Urjit Patel in the recent weeks, exercising its powers under this section, on various issues like liquidity crunch in the NBFC sectors, the capital requirement for banks and lending to small and medium enterprises.
Reports also indicated that RBI governor Urjit Patel could step down as the differences between the RBI and the government rise.
This section has never been used in India until now, not even during the 1991 Indian economic crisis when the country was close to a default.
The finance ministry in a statement has said that the autonomy for the central bank within the framework of the RBI Act, is an essential and accepted governance requirement and governments in India have nurtured and respected this.
“Both government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy. For the purpose, extensive consultations on several issues take place between the government and the RBI from time to time. This is equally true of all other regulators,” the finance ministry stated.
Sakshi Batra in conversation with Gaurav Choudhury, Deputy Executive Editor, Moneycontrol finds out what could be the macro implications of this rift.Watch the video for more…