RBI, Govt can't bare their talk: FM on Section 7 row
New Delhi: Finance Minister Arun Jaitley on Wednesday refused to be drawn into the row over his ministry using a never-used provision to ask the RBI for resolution of issues, saying discussions and consultations with the central bank have never been disclosed. At a news conference, the minister said that he would not say anything more than what a Press statement issued by his ministry on the RBI row said in the morning.
Asked if the Government has used the never-used provision under Section 7 of the RBI Act that gives it power to issue directions to the central bank on matters of public interest, he replied, "That statement also says that the communication between the government and the RBI and layers of consultations (happening) at what level, how it happened and the nature have never in the history been disclosed publicy." Only a final decision arrived is communicated, he added.
The row was sparked on Friday when RBI Deputy Governor Viral Acharya warned in a hard-hitting speech that undermining the central bank's independence could be "potentially catastrophic", possible indication of the RBI being pushed to relax its policies ahead of general elections next year. Sources said that the government has sent at least three letters on different issues under Section 7 of the RBI Act that gives it powers to issue any direction to the central bank governor "on matters of public interest".
RBI Governor Urjit Patel may consider stepping down if the government issues an unprecedented direction, TV channels CNBC-TV18 and ET Now reported citing sources on Wednesday, sparking a sell-off in rupees and bonds. Section 7 has two parts — consultation and then issuing a direction to RBI for taking some action in public interest. Sources said that right now only consultations are on, which may or may not result in any direction being issued, sources said.
Former finance minister and senior Congress leader P Chidambaram warned of "more bad news" if the government does, indeed, invoke Section 7 of the RBI Act. "If, as reported, the government has invoked Section 7 of the RBI Act and issued unprecedented 'directions' to the RBI, I am afraid there will be more bad news today. We did not invoke Section 7 in 1991 or 1997 or 2008 or 2013. What is the need to invoke the provision now? It shows that the government is hiding facts about the economy and is desperate," he tweeted.