On Thursday, at a press conference ahead of key RBI meet, former Union minister P Chidambaram said the spat between the government and the Reserve Bank is over a huge sum of money that the government has demanded from the Central Bank. He further said that the day of reckoning is November 19, when a board meeting is scheduled and hoped that the Governor stands his ground.
P Chidambaram had held the position of the finance minister in the government of Manmohan Singh. He accused the current Modi led BJP government of demanding Rs 1 lakh crore from the reserves of the Reserve Bank of India. He further added that the government is trying to step up expenditure in an election year despite facing a fiscal deficit.
The day of reckoning is November 19 when the RBI Board is scheduled to meet. The government has packed the RBI Board with its hand-picked nominees and is making every effort to ram through its proposal at the Board meeting.
— P. Chidambaram (@PChidambaram_IN) November 8, 2018
Mr Chidambaram added, “When the Governor refused, the government took the extraordinary, unprecedented step of invoking Section 7 of the RBI Act.” It is to be noted that Section 7 gives the central government the power to consult and give instructions to the central bank chief in public interest.
Under such circumstances, the Governor has only two options — either to transfer the money or resign. “When governor refused to oblige, the government took the unprecedented step of imposing Section 7 of the RBI Act,” said the former finance minister.
P Chidambaram also accused the government of filling-in the board of RBI with its men, and said it was making ‘every attempt to ram through its proposal at the meeting’.
He added, “This government does not know what catastrophic consequences there will be if the RBI transfers the money, or the governor resigns.”
Notably, the on going fued between between the RBI and the government became public last month after RBI Deputy Governor Viral Acharya made a case for autonomy. Mr Acharya also made it clear that he had the backing of his boss for speaking up.
However, the government said it was conducting ‘extensive consultations’ with the RBI in ‘public interest’.