RBI Board Will Meet On Nov 19 Amidst Report That Govt Has Invoked Section 7 To Compel RBI Fall In Line In Public Interest
AMIDST reported differences on policy matters between the Government and India’s central banker, Governor of Reserve Bank of India Urjit Patel has called a board meeting on November 19 to discuss the pending issues which created a rift between the government and RBI .Meanwhile, the Finance Ministry said on Wednesday that it respects the central bank’s autonomy.“The autonomy of 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,” the economic affairs department of the finance ministry said in a statement. The government did not deny reports that it invoked never applied Section 7 of the RBI Act 1934 to initiate discussions on various issues, including easing prompt corrective action (PCA) framework and providing liquidity to the non-banking finance companies (NBFCs). The report of the invocation of the section sparked speculation that the RBI Governor, an appointee of the incumbent government, may opt for quitting. According to the provision, the Central government may issue directions to the RBI as it may “consider necessary in public interest” after consultation with the RBI Governor. Section 7 deals with ‘management’ of Mumbai headquartered RBI. The Business Standard reports that the Finance Ministry said that both the government and the RBI “have to be guided by public interest and the requirements of the Indian economy.”The government and the RBI have had disagreements on a host of issues recently which include easing capital adequacy norms for public sector banks, bringing some of them out of PCA, forbearance for the MSMEs and liquidity situation in NBFCs.“Extensive consultations on several issues take place between the all other regulators,” the finance ministry said.The finance ministry said on Wednesday that it respects the central bank’s autonomy.