Central government invoke section 7 Act, 1934: History and amendment

Marco Green
November 2, 2018

Reserve Bank of India Governor Urjit Patel should work in sync with the Centre or should resign, the head of the Rashtriya Swayamsevak Sangh's economic wing has said. The NDA government had promoted Urjit Patel to the post of RBI governor, and he is now desperate to maintain RBI's autonomy. Ashwani Mahajan is chief of the RSS's Swadeshi Jagran Manch (SJM) economic group.

The Centre is unlikely to issue any direction under Section 7 to the RBI that goes against the majority decision of the board of the banking regulator, ET Now learns from senior officials of the Narendra Modi government.

His comments indicated that the RBI was pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May.

The government has reportedly been upset about a remark by one of Patel's deputies, Viral Acharya, on Friday, when he warned that undermining a central bank's independence was "potentially catastrophic". However, this is the first time that reports suggest, Section 7 of the RBI Act has been invoked.

Section 7 entitles the government to instructions to the RBI after it consults with the Governor. the directions could be issued on any matter with the Centre find to be of Public interest. however, it still remains under the wraps that how the Centre will be using the Section 7 of the RBI Act.

The government was not supportive of the provision at that time and the clauses were re-drafted accordingly.

The meeting would discuss pending issues of the meeting held last week that are believed to have created a rift between the government and the central bank.

He said higher interest rates were hitting small businesses and there was a need to provide relief to save millions of jobs.

The Manch chief also said the RBI should agree to allow the government to take much of its surplus of cash reserves, estimated at almost Rs 3.6 trillion ($48.67 billion), so that they could be invested, bolstering economic growth.

The Ministry of Finance has acknowledged that the autonomy of the Reserve Bank of India is an 'essential and accepted governance requirement, ' in a statement issued on Wednesday.

Other reports by Click Lancashire

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