As the Reserve Bank of India board meeting got underway on Monday, Congress President Rahul Gandhi accused Prime Minister Narendra Modi of attempting to destroy the central bank through its independent directors who are nominated by the central government.
He further hoped that RBI governor Urjit Patel “has the spine” and put pressure back on the government.
“Mr Modi and his coterie of cronies, continue to destroy every institution they can get their hands on. Today, through his puppets at the #RBIBoardMeet he will attempt to destroy the RBI. I hope Mr Patel and his team have a spine and show him his place,” Gandhi tweeted.
The RBI board meeting is likely to reflect the uneasiness between the government and the central bank over a host of issues including the economic capital framework, capital adequacy, stringent rules relating to prompt corrective action (PCA) and availability of liquidity for MSMEs.
According to reports, RBI governor Urjit Patel is expected to support its mission to clean up the bank’s balance sheets.
The government has criticised the RBI for failing to check indiscriminate lending during 2008 and 2014 that has led to the present bad loan or NPA crisis in the banking industry.
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Also, the government feels that the MSME sector needs some support after being impacted by demonetisation and implementation of the Goods and Services Tax (GST).
Patel, however, has been averse to the government’s demand as it considers the sectors to be vulnerable.
The Congress has accused Prime Minister Narendra Modi’s government of being bent on “snatching” the contingency reserves of the RBI amid a tussle that has seen the central bank officials call out for greater autonomy.
Read | Modi govt ‘planning demonetisation part-II’ to help its ‘crony friends’: Congress on RBI row
The opposition said the government was seeking around Rs. 3.6 lakh crore from the central bank to distribute electoral sops ahead of the general elections.
However, the government has clarified that it was not seeking Rs. 3.6 lakh crore capital from the RBI but was only in the discussion for fixing appropriate economic capital framework of the central bank.
Congress leader P Chidambaram went a step forward to accuse that the central government of attempting to “capture” the bank to gain control over its Rs 9 lakh crore reserves.
“Government is determined to ‘capture’ RBI in order to gain control over the reserves. The other so-called disagreements are only a smokescreen (sic),” he tweeted.
“November 19 will be a day of reckoning for central bank independence and the Indian economy,” the former finance minister had said.
The rift between the government and the RBI surfaced after Deputy Governor Viral Acharya in a hard-hitting speech pitched for “effective independence” of the central bank.
Acharya had said governments that do not respect central bank’s independence would sooner or later incur the “wrath of financial markets, ignite an economic fire and come to rue the day they undermined an important regulatory institution”.
Acharya emphasised that undermining a central bank’s independence is akin to committing a “self-goal” for any government.
There were also reports claiming that the government had invoked never-before-used powers under Section 7 of the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.