Page 38 - Banking Finance March 2019

ARTICLE

DOVETAILING

GOI & RBI:

FUNCTIONAL

FULCRUM

Prelude: However, in the recent past, the synergy and the harmony
between the two great institutions have taken a nosedive
A country like India having huge diversity of resources,
demographically, religiously, socio- economically, is one of and tensions escalated between RBI and the GOI, as the
government on all probability intended to invoke Section 7
the largest democratic countries in the world and so far has
(1) of the RBI Act for addressing its concerns about a liquidity
established itself as a politically resilient, economically
progressive and is independently pursuing many squeeze in the market due to regulatory issues including the
suggestion to relax the prompt corrective action (PCA)
developmental projects and has created a niche of its own
framework for some state-run banks. Other reasons of the
in the map of the world. This all has happened on the
present standoff between the Government and the central
strengths of its democratic values followed at all levels by
its institutions, be it RBI - the central bank, other financial bank are that the former has sought for the views of the
institutes- PSBs, or other banks and the synergy they share Governor on deploying the central bank's capital reserves
with the Government of India and it's various agencies. This to infuse liquidity into the markets and also instructed RBI
is the basic requirement for a country to sustain its growth to ease norms for MSME sector.
in all the areas and to remain socio-economically- a vibrant What is Section 7?
country.
In India, perhaps on nationalisation of RBI in 1949, it was

About the author felt that if a rare situation arose where the differences
between government and RBI were not reconciled through
discussions, there should be a way out. It is interesting to
Vijay Kumarr Shaw
note that the central banks in a large number of countries
Chief Manager, Faculty
are also not creatures of constitutions and the instances of
Union Bank of India
differences between the governments and central banks are
Staff Training Centre, Kolkata
not uncommon. For this, Section 7 (1) of the Reserve Bank
38 | 2019 | MARCH | BANKING FINANCE