Government trying to capture RBI ahead of Lok Sabha polls: P Chidambaram

File photo of P Chidambaram. Photograph:( Reuters )

WION Web Team Delhi, India Nov 08, 2018, 03.43 PM (IST)

Former Finance Minister and senior Congress leader P Chidambaram on Thursday attacked PM Modi's government stating that the regime is trying "to 'capture' RBI ahead of Lok Sabha poll, this will be catastrophic."

He alleged that the government has packed the central bank's board with handpicked nominees, and was making every attempt to push through its proposals at the RBI board meeting on November 19.

"The government stares at a fiscal deficit crisis... The government wants to step up the expenditure in an election year. Finding all avenues closed, in desperation, the government has demanded Rs 1 lakh crore from the reserves of RBI," the former finance minister said at a press conference.

If RBI Governor Urjit Patel stands his ground, the Centre was planning to issue a direction under Section 7 of the RBI Act, 1934, directing the apex bank to transfer Rs 1 lakh crore to the government's account, he claimed.

"The day of reckoning is November 19 when the RBI board is scheduled to meet. The government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting," Chidambaram said.

"If the RBI either defies the government or RBI governor resigns, in either event, the consequence will be catastrophic," he added.

Chidambaram also added that state-wise alliances are going to benefit the Congress, news agency ANI reported. 

"State-wise alliances will benefit Congress, it is the best way to defeat BJP," he told media. 

Chidambaram's comments came shortly after Union Finance Minister Arun Jaitley claimed that confiscating money was not the aim of launching demonetisation, adding that the move led to the formalisation of the economy and expanded tax base

The reactions came on the second anniversary of the demonetisation move that the Modi government undertook in the year 2016. 

The demonetisation of Rs 500 and Rs 1,000 currency notes in November 2016, Jaitley said, had resulted in more formalisation (of the economy), more revenue, more resources for the poor, better infrastructure, and a better quality of life for our citizens, news agency PTI reported. 

The government had on November 8, 2016, announced a ban on old 500 and 1000 rupee notes, to curb black money in the system.

(With inputs from agencies