Pressuring RBI “Catastrophic”, Nov 19 Day Of Reckoning: P Chidambaram

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P Chidambaram accused the government of demanding Rs 1 lakh crore from RBI reserves.

New Delhi:

Former Union minister P Chidambaram today said the spat between the government and the Reserve Bank is over a huge sum of money the government has demanded from the Central Bank. The imposition of a never-before used rule was meant to force the hand the Governor, who has refused to pay. The day of reckoning is November 19, when a board meeting is scheduled. "Hope the Governor stands his ground," Mr Chidambaram said.

Putting pressure on the Reserve Bank of India and forcing Governor Urjit Patel to step down will have "catastrophic consequences", Mr Chidambaram said.

A finance minister in the government of Manmohan Singh, Mr Chidambaram accused the government of demanding Rs 1 lakh crore from the reserves of the Reserve Bank of India. The government, he said, is trying to step up expenditure in an election year despite facing a fiscal deficit.

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"When the Governor refused, the government took the extraordinary, unprecedented step of invoking Section 7 of the RBI Act," Mr Chidambaram said. Section 7 gives the government the power to consult and give instructions to the central bank chief in public interest.

Under the circumstances, the Governor has only two options — transfer the money or resign. "When governor refused to oblige, the government took the unprecedented step of imposing Section 7 of the RBI Act," the former finance minister said.

Accusing the government of packing the board of RBI with its men, Mr Chidambaram said it was making "every attempt to ram through its proposal at the meeting".

"This government does not know what catastrophic consequences there will be if the RBI transfers the money, or the governor resigns," he added.

The tension between the RBI and the government became public last month after RBI Deputy Governor Viral Acharya made a case for autonomy. He also made it clear that he had the backing of his boss for speaking up.

The government said it was conducting "extensive consultations" with the RBI in "public interest".

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