Chennai: Leader of the Opposition and DMK president M K Stalin on Wednesday warned the Centre that its attempt to undermine the Reserve Bank for "narrow political considerations" would have "a catastrophic" effect on the national economy.
Accusing the Narendra Modi Government of having systematically undermined all autonomous institutions, Stalin expressed shock over its reported attempt to ease out the current RBI Governor Urjit Patel just as it had forced out renowned economist Raghuram Rajan.
"Having failed to deliver stable economic progress for the country, Prime Minister Modi and Finance Minister Arun Jaitley are now trying to cover up their failure by invoking never-before-used powers under Section 7 of the RBI Act to issue directions to the RBI. No other government in independent India has resorted to this act. This is murder of democracy, it is a planned move to defeat RBI's autonomy", said Stalin in a statement here.
Stalin said it was distressing that the BJP Government was misusing its power to undermine the independence of the central bank. In this connection he cited the warning by Deputy Viral Acharya that any such "rash move" would be "potentially catastrophic and trigger a crisis of confidence in the capital market".
Stalin's statement came amid the running feud between Finance Minister Arun Jaitley and RBI Governor Urjit Patel and reports that the Government was pressuring the central bank to relax lending norms to help corporates ahead of the next Lok Sabha elections and that it was also trying to set up a new regu-lator for payment sys-tems.
Stalin said that having pushed the nationalised banks into the red and letting big defaulters like Vijay Mallya and Nirav Modi flee the country, the BJP Government was now putting pressure on the RBI to ease norms on lending, interest rates, liquidity and cash reserve to help it meet tall promises it planned to make ahead of the next elections.
What is Section 7 of RBI Act?
It empowers the Union Government to give instructions to the RBI Governor to act on certain issues that the government considers serious and in public interest. "The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest", says the Act.
This provision has never been used in independent India so far-not even when the nation was close to default in 1991or in the aftermath of the 2008 global economic crisis.
