File photo. Photograph:( Reuters )
The Indian government has invoked never-used-before powers under the RBI Act allowing it to issue directions to the central bank governor on matters of public interest, the Economic Times reported on Wednesday.
Separate letters have been sent to the Reserve Bank of India (RBI) governor in recent weeks, exercising powers under the Section 7 of the RBI Act on issues ranging from liquidity for non-banking financial companies, capital requirement for weak banks and lending to small and medium enterprises, the report said.
Section 7 says that 'the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest', a statute that has not been used in independent India, according to the Economic Times.
The RBI was not immediately available for comment. The finance ministry could not be immediately reached for comment.
Tensions between the RBI and the government have spilled into the public domain after Deputy Governor Viral Acharya said last week that undermining central bank independence could be "potentially catastrophic", indicating the authority is pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May.
Adding to the row, Finance Minister Arun Jaitley blamed the central bank for failing to stop a lending spree during 2008-2014 that left banks with $150 billion of bad debt.