New Delhi: Facing criticism for invoking a hitherto unused section to issue instructions to the RBI, the government on Wednesday said that it respected the autonomy of the central bank but within the framework of the RBI Act.
“The autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this,” a brief Finance Ministry statement said.
The clarification comes amid reports said that the government has invoked Section 7 of the RBI Act that empowers the government to consult and direct the RBI to act on issues that it considers necessary in public interest.
The Finance Ministry said that both the government and the Reserve Bank of India (RBI) have to be guided by public interest and the requirements of the Indian economy, for which extensive consultations take place between them.
“The government never makes public the subject matter of those consultations. Only the final decisions taken are communicated.
“The government, through these consultations, places its assessment on issues and suggests possible solutions. The government will continue to do so,” the Ministry said.
The tiff between the RBI and the government came into limelight after the bank’s Deputy Governor Viral Acharya warned the government last week against interfering in the central bank’s functioning.
On Tuesday, Finance Minister Arun Jaitley retaliated by alleging that the central bank looked the other way when indiscriminate lending happened between 2008 and 2014 leading to the bad loans crisis.