New Delhi: Slamming the government for using for the first time a clause of the RBI Act, former Union finance minister P Chidambaram on Wednesday alleged that the NDA dispensation is “hiding facts” about the economy and is “desperate”. In a series of tweets, the senior Congress leader said the governments he was a part of in the past had never used Section 7 of the Reserve Bank of India Act, under which a direct order can be issued by the government to the central bank to carry out its wishes in “public interest”. “We did not invoke Section 7 in 1991 or 1997 or 2008 or 2013. What is the need to invoke the provision now? It shows that government is hiding facts about the economy and is desperate (sic),” he said.
Referring to a statement issued by the government, which said extensive consultations on several issues take place between it and the RBI from time to time, Chidambaram asked if it contained the truth alone, why was it necessary to issue the statement? “Obviously, the government has concealed something. The buzz is that government has recently written one or more letters to the RBI. Will government say whether such letters have been written and whether the letters specifically refer to Section 7 of the RBI Act?” he asked.
Chidambaram also said: “If, as reported, Government has invoked Section 7 of the RBI Act and issued unprecedented ‘directions’ to the RBI, I am afraid there will be more bad news today.” The government for the first time ever used the provision of law to ask the RBI for resolution of differences between them on stressed loans in power sector and other issues, sources privy to the development said.
Without acknowledging the notices sent to RBI under Section 7 of the RBI Act, the finance ministry in a statement said autonomy was “essential” but its functioning must be guided by public interest and needs of the economy. “For the purpose, extensive consultations on several issues take place between the government and the RBI from time to time. This is equally true of all other regulators. Government of India has never made public the subject matter of those consultations,” the finance ministry statement said.
Sources in the know of the development said the government has sent at least three letters on different issues under Section 7 (1) of the RBI Act. They, however, insisted that the government has not taken any action of issuing any specific direction and has only initiated consultations with the central bank on unresolved issues.