Management of Reserve Bank of India

Sections 7 and 8 of RBI Act, 1934

Media has been debating the harm likely to be inflicted on the Indian Economy if GOI invokes Section 7 of the RBI Act, 1934 to ‘discipline’ RBI Governor Urjit Patel and his Team RBI. We are told that when RBI Central Board meets on November 19, GOI nominees on RBI’s Central Board will plead Centre’s case for (a) relaxations in Prompt Corrective Action (PCA) norms in respect of PSBs, (b) deciding adequacy of reserves for RBI and (c) relaxation of regulatory norms to increase flow of credit to certain sectors among some twelve issues on which difference in perception exists between finance ministry and RBI. Looks very fair indeed.
Section 7 of the RBI Act reads:
Section 7. Management.- (1) 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.
(2) Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.
(3) Save as otherwise provided in regulations made by the Central Board, the Governor and in his absence the Deputy Governor nominated by him in this behalf, shall also have powers of general superintendence and direction of the affairs and the business of the Bank, and may exercise all powers and do all acts and things which may be exercised or done by the Bank.
The Section just ensures fair and proper management of the Reserve Bank of India. I will not elaborate on the redundancy of the current media debate about ‘invoking Section 7’ beyond saying that any direction under this Section will be issued in consultation with RBI Governor and if the Governor fails to convince the RBI’s policy stance on any issue and GOI opts to discipline the Governor by issuing a ‘direction’, the Governor will not fall sick, but opt to exit through the front door of RBI’s Central Office Building.
Second, about splitting the RBI Central Board vertically with GOI nominees on one side and RBI Governor and his Deputies on the other.
A reading of Section 8 of the RBI Act will convince one that the entire RBI Central Board comprise either ‘appointees’ or ‘nominees’ of the Central Government. No appointment/nomination is made by GOI after getting a prior undertaking from the prospective candidates about falling in line with the finance ministry’s policy perceptions. So, once on Board or in Office the individuals apply their mind and express their views without allegiance to their ‘employers’.
M G Warrier, Thiruvananthapuram



Comments

Tenkasi Nallasivan said…
The recently nominated Director, S.Gurumurthy has reiterated the demands made from the Ministry and certainly he may try to recruit a few more Directors to support the Government cause. It is very much doubtful whether any of the other Directors go out of the way to support the stand of the RBI though the Central Bank has no secret agenda except to perform the role assigned to it under the RBI Act as the circumstances warranted.
November 16, 2018 at 6:18 AM
www.warriersblog.com said…
So far,it has not been easy to influence RBI to change its course in favour of vested interests. Even the Committee approach via FSLRC didn't succeed.
November 20, 2018 at 4:30 PM
Post a Comment

Popular posts from this blog

NAVAGRAHA STOTRAM

NAVAGRAHA STOTRAM* According to astrology, the positions of the nine planets in the twelve constellations of the zodiac and their movements are considered to be quite significant. The nine planets ‘Navagraha’ affect every aspect of human life. They play an important role in the activities, physical and mental health and life of any individual. The unfavorable positioning of any of these planets can be the cause of problems, bad health, and stagnation for many people. However, there is a solution to avoid the ill effects of the position and movement of the ‘Navagraha’ in our lives. Navagraha mantras (or stotram) are simple mantras which work as powerful healing tools to reduce the negative effects of any of the nine planets. These mantras are Hindu holy hymn addressing the nine planets. Benefits Of Navagraha Stotram And The Way to Practice The Navagraha Stotram is written b y Rishi Vyasa and is considered to be the peace mantra for the nine planets. They are powerful m
Read more

THE SUNSET OF THE CENTURY

*SUNSET OF THE CENTURY: Rabindranath Tagore THE LAST SUN OF THE CENTURY SETS AMIDST THE BLOOD-RED COLOURS OF THE WEST AND THE WHIRLWIND OF HATRED. THE NAKED PASSION OF SELF-LOVE OF NATIONS IN ITS DRUNKEN DELIRIUM OF GREED IS DANCING TO THE CLASH OF STEEL AND THE HOWLING VERSES OF VENGEANCE. THE HUNGRY SELF OF THE NATION SHALL BURST IN A VIOLENCE OF FURY FROM ITS OWNSHAMELESS FEEDING FOR IT HAS MADE THE WORLDITS FOOD, AND LICKING IT, CRUNCHING IT AND SWALLOWING IT IN BIG MORSELS, IT SWELLS AND SWELLS TILL IN THE MIDST OF ITS UNHOLY FEAST DESCENDS THE SUDDEN HEAVEN PIERCING ITS HEART OF GROSSNESS…   *Note: “The Sunset of the Century”, translated by the poet, from Naivedya; The English Writings of   Rabindranathtagore, Volume II,Delhi 1996, page 466. Quoted in his article ‘Critiquing nationalism’ by K Satchidanandan (Frontline, November 14, 2014). The article takes you to a much broader spectrum. HAPPY READING(READ MORE STAN
Read more

The King of Ragas: Sankarabharanam

                       The King of Ragas                      --------------------------     Long ago  serpents were put to lot of hardships.They  were afraid of other animals. They had to seek refuge in the hermitage of sage Saraba.The sage was a true devotee of Lord Shiva.He used to pray Shiva with melodious songs. As he sang a particular raga the snakes were much inspired and they began to dance,. Slowly the serpents became friendly with the sage. They brought water in their mouths for the pooja.They secreted  a special fluid in which the flowers got stuck to their bodies.The sage was much astonished by the service of the snakes.As the sarpas became very close to the sage ,they requested him to help having Darsan of Lord Siva. As requested by the sage Shiva appeared in the form of  a  Kapalika and stayed in the ashram.The music and dance of the snakes continued. The snakes rendered service to the kapalika as they considered him  a Shiva bhakta.Shiva was much pleased with t
Read more