RBI-Centre standoff: Amid faceoff between the Reserve Bank of India and the government, a crucial meeting of the central bank’s Board of Directors will be held today. The RBI and the Centre are at loggerheads over various issues but the bone of contention between the two is reserves that the RBI holds. The Central government was seeking Rs 3.6 lakh crore from the Urjit Patel-led RBI, however, the Finance Ministry officials have denied these reports. Reports say the Modi government has proposed a discussion on governance and an appropriate economic capital framework during today’s RBI meeting.
The tussle between the Finance Ministry and the banking regulator came under public glare when for the first time, RBI Deputy Governor Viral Acharya said that government doesn’t respect the central bank’s autonomy and said government’s intervention in the operational mandates of RBI negates its functional autonomy. The government had criticised the RBI for publicly talking about the rift. The Centre’s recent steps are seen as efforts by the central government to dilute the central bank’s policies.
The appointment of three new directors- S Gurumurthy, Subhash Chandra Garg and Rajiv Kumar – in the RBI board is seen as government’s efforts to oversee the bank’s function. S Gurumurthy, who is the co-convener of the Rashtriya Swayamsevak Sangh economic wing called Swadeshi Jagaran Manch, recently defended the government’s demonetisation move and said the Indian economy would have collapsed if there was no note ban.
RBI Governor Urjit Patel had met Prime Minister Narendra Modi last week in a bid to sort out differences between the Centre and the bank regulator. The government had recently invoked the never-before-used powers falling under section 7 of the RBI Act to direct the RBI Governor on matters of public interest.