The minister of finance is the person entrusted to the ongoing dialogue between the government and the RBI, although the two sides continue to participate in the public opinion. Photo: Abhijit Bhatlekar / Mint
New Delhi: The Union government will not be entitled to publish a directive to the Reserve Bank of India, even if the contested issues between them argue that it should be resolved by the central bank's board meeting on November 19th. Yayın He has a clear stance that he has the right to publish directives in the government. This clause, the presence of all the Ambassadors who define the role of the organizer, "a person who is familiar with development demanded to be defined.
In particular, Section 7 (1) of the Law on Indian Law of 1934 states that the Union government ile may, from time to time, give the bank such a direction after contact with the governor (center) Özellikle. it was deemed necessary in the public interest kamu. In addition, Chapter 7 (2) enables government authorities to transfer RBI's work to the central board.
The above-mentioned person said that the dialogue between the finance ministry and the RBI continues, although the two sides continue to participate in the public opinion. Edi The minister of finance is entrusted, “he added.
The secretary of the economy, Subhash Chandra Garg, said Friday that the government and the central bank of the RBI are negotiating to finalize the economic capital framework, which would lead to the transfer of surplus reserves to the central bank and the government.
Referring to speculation that RBI governor Urjit Patel was threatened with resigning, he said that the initiative was inexplicable as he had done nothing. “There are differences. India is a very complex economy today, and from time to time there is a tendency to overlap in the surveillance phase between a regulator and the government. Then, it needs to be engaged and sharpened, O he said.
If this is the case, it may be good that both sides clearly turn the tension and study the middle ground.
An e-mail sent to RBI remained unanswered.
After climbing tensions between the RBI and the government, the central bank has raised the concerns of the RBI Act 7 (1) to raise concerns about the liquidity squeeze in the market.
The first letter was written after the proposal of the High Court of Allahabad that the government proposed to instruct RBI in a lawsuit involving independent energy producers who have suffered bankruptcy and bankruptcy because of their accumulated debts, in accordance with Section 7 of the RBI Act. code. He then sent another letter on October 10th, seeking patel's central bank's views on the use of capital reserves to provide liquidity to the markets.
The last letter was on regulatory issues, including the proposal to loosen the emergency correction action (PCA) framework for some state banks.
The aforementioned person said that there was no extraordinary situation in relation to Section 7 of the RBI Act and that the Union government was similarly authorized in relations with other regulators.
In accordance with the Indian Code, Chapter 18 of the 1999 Regulation on Insurance Regulation and Development, the central government has the authority to issue instructions to the insurance regulator, which is deemed to be final. Chapter 19 of the IRDAI Act authorizes the central government to replace IRDAI for six months.
“There is provision, but it is rarely used. As far as I know, IRDAI has never been used in history, Bil he said.
In order to be sure of this, even though it threatened the use of previous governments, Section 7 of the RBI Act has never been used.
Similarly, sections 16 and 17 of the Indian Securities and Commodities Act 1992 and sections 43 and 44 of the Pension Fund Regulation and Development Agency have provisions that allow the government to give instructions to the regulators and replace their boards. There are similar provisions in Chapter 25 of the India Law Regulatory Authority 1997.
Var Such substances always exist in actions governing the regulators. The reason for this is because of the division between the government and the regulators, where the former made the policy and where the latter applied it. He said Pronab Sen, program manager of the India International Growth Center program.
Kon The issues that the government has started to discuss under Chapter 7 of the RBI Act are more operational than policy, and ideally, this section should not be used. This section is a secret threat that we will issue a directive if you cannot reach an agreement,, Sen said, as the former chief statistician of India.
The general idea of the government is that while RBI remains faithful to its stance in interest rates as part of its strategy for inflation targeting, it is comfortable, although comfortable, but has reservations about overthrowing economic issues.