Urjit Patel may resign as Jaitley’s remarks widen RBI-govt rift

RBI vs Government Here's what Section 7 of the RBI Act states

RBI vs Government: Urjit Patel may resign as governor after Centre invokes never-used powers

The government has sent letters to the RBI in recent weeks, exercising its powers under the section, on matters such as liquidity for non-banking financial companies, capital requirements for weak banks and lending to small and medium enterprises, The Economic Times reported.

The Section 7 of the RBI Act reads: "The Central government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest".

On Friday, RBI Deputy Governor Viral Acharya warned that undermining a central bank's independence could be 'potentially catastrophic, ' in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers ahead of a general election due by next May. The law cited by the government is Section 7 (1) of the Reserve Bank of India Act, according to the people.

The letters are the latest flare-up in a dispute between the central bank and the government.

BJP slammed Rahul Gandhi for his criticism against Prime Minister Narendra Modi over the RBI-Centre rift, and said that it reflects Congress party's grounding, "which is fast eroding in national politics".

"I think the matter is serious enough and it will be best if the RBI and the government don't talk across each other through lectures - we have had two already", Chidambaram told reporters.

On Tuesday, Finance Minister Arun Jaitley blamed the RBI for India's huge bad debt pile up, saying it "looked the other way" while banks were allowed to lend indiscriminately in the aftermath of the global financial crisis.

Patel saved India from balkanisation: PM Modi
With several attractions, the Gujarat government has built a tourism ecosystem around the Statue of Unity to draw visitors. More then 70,000 tonnes of cement, 24,000 tonnes of steel and about 1,700 tonnes of bronze have gone into its construction.

One said that it was vital that what happened between the government in New Delhi and the RBI in Mumbai was kept confidential.

At the time, most legal experts believed that it was unlikely the Modi government would issue directions under the rarely-used provision. The gains were largely a result of a separate announcement by the RBI about an injection of liquidity through government bond buying.

Government officials believe that RBI Governor Urjit Patel has some responsibility for the controversy, and he can not expect an extension of his current three-year term - which ends next September - "as his right", one of the officials added.

As The Wire reported in September 2018, the Allahabad High Court, which was hearing petitions filed by power companies against the central bank's stricter NPA (non-performing asset) norms, had asked the Centre to examine the possibility of advising the RBI under Section 7.

The rift between the RBI Governor Urijit Patel and the Central government reportedly widened with Central Bank's Governor considering to resign from the post of the Governor.

The government officials Reuters spoke to on Monday declined to be identified because of the sensitivity of the subject.

This temporarily takes away the RBI's independence and autonomy. The report, which has not received any by official confirmation, said that the government is keen on a bureaucrat as the next governor if Patel resigns.

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