RBI Act: Chidambaram slams Centre for citing never-used clause

Former Union finance minister P Chidambaram on Wednesday slammed the government for citing a never-used clause of the Reserve Bank of India Act of 1934 and alleged that the BJP dispensation is “hiding facts” about the economy and is “desperate”.

The Congress leader said that the governments he was a part of in the past had never used Section 7 of the RBI Act, under which a direct order can be issued by the government to the central bank to carry out its wishes in “public interest”.

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“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.

“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 in a series of tweets.

The Finance Ministry and the RBI are said to have differences on the manner in which the latter handled weak public sector banks, tight liquidity in the market and ways of resolving bad loans in the power sector.

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The ministry had sent at least three letters on different issues under Section 7(1) of the RBI Act that gives it powers to issue any direction to the central bank governor on matters of public interest. Sources, 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.