Section 7 Of RBI Act Designed To Be Invoked In Emergency Situations: Arvind Panagariya
Amid reports of rift between the Centre and the Reserve Bank of India (RBI), former Vice Chairman of the NITI Aayog, Arvind Panagariya, in a conversation with The Quint’s Editorial Director Sanjay Pugalia, noted that differences between the government and the bank were not unheard of in the past and invoking Section 7 wouldn’t amount to “unconstitutional” behavior.
“If we kept Section 7 in the constitution, it was possibly with the foresight to use it in some kind of an emergency situation.”Arvind Panagariya
This comes after reports stated that central government has issued several letters to the RBI to initiate consultations under Section 7 of the RBI Act.
Section 7 of the RBI Act empowers the government to consult and give instructions to the RBI governor to act on certain issues that the government considers serious and in public interest. Since this is the first time in history that a central government is even referring to the Act, tensions have mounted within the RBI, with reports suggesting that the RBI Governor, Urjit Patel, was likely to step down from his position.
Panagariya also said he didn’t know the details of the rumoured rift between the Central government and the Central bank, as a result of which he couldn’t give his opinion on the same.
On being asked about his opinion on what the RBI could have done to lead the central government to even think about Section 7, Panagariya said that since he wasn’t an expert on regulation, as his forte lay in exchange rate management and monetary management, he couldn’t comment on this.
However, he said that as far as his knowledge on the subject goes, he believes the RBI was doing a good job.
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.