KOLKATA: Senior Congress leader P Chidambaram on Thursday said that Narendra Modi government of trying to capture the Reserve Bank of India to tide over its fiscal crisis.
"The government stares at a fiscal-deficit crisis, they want to step up the expenditure in an election year. Finding all avenues closed, in desperation, the government has demanded Rs 1 lakh crore from the reserves of RBI," said Chidambaram.
“If RBI Governor Urjit Patel stands his ground, the Centre is planning to issue a direction under Section 7 of the RBI Act, 1934, directing the apex bank to transfer Rs 1 lakh crore to the government's account. The government had packed the central bank's board with handpicked nominees and was making every attempt to push through its proposals at the RBI board meeting on November 19”, the former Union finance minister claimed.
According to Section 7 of the RBI Act, gives special powers to the government to issue directions to the RBI governor on issues of public interest.
"If the RBI either defies the government or the RBI governor resigns, anyways, the consequence will be catastrophic, it will damage the credibility and image of the RBI " he added.
The disagreements between them came out in open, when RBI Deputy Governor Viral Acharya, in a hard-hitting speech, said failure to defend the central bank's independence would "incur the wrath of the financial markets".
It later emerged that the government had invoked a never-before-used provision of the law, Section 7 of the RBI Act to ease NPA norms so that banks can kick-start lending and support growth and transfer more dividend to boost liquidity.
Without acknowledging that the notices have been sent to the RBI, the Union Finance Ministry had said the "autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this".
With inputs from PTI