Arun Jaitley Admits Invoking Section 7 Of RBI Act

Finance Minister Arun Jaitley, in an interview to India Today, confirmed that the government did invoke the Section 7 of the RBI Act in order to give directives to the country’s central bank on matters of public interest.

“In some sectors in the economy there is a serious crisis of liquidity and perhaps even credit,” Jaitley said in the interview. “The government is only using all instruments of consultation. There is a consultation process even in Section 7.”

The stand-off between the government and the central bank has been going on for over a month. The Centre wants the RBI to ease restrictions on weaker public sector banks to enable them to begin lending again. The RBI, however, argues that the balance sheets of these banks need to be strengthened further before they are allowed to start lending.

“There is a global standard. Why do we have twice the global standards,” Jaitley questioned. “I don't need this money for the fiscal deficit, I've said it before. But should there not be a framework just as monetary policy has been put in a framework?”

Jaitley also criticised the RBI for bringing the differences between the two institutions in public domain. He said it was the central bank which crossed the red line. “Except for invoking all methodologies of consultation we have by and large maintained a public silence because there is a certain level of dignity and institutional courtesy you deal with each other.”