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finance | IST

Government may establish authority of RBI board through new regulations

Amid ongoing tussle between the government and the Reserve Bank of India (RBI), the centre may move to establish the authority of the latter's board through new regulations, said people familiar with the matter.
The government is likely to propose a new set of regulations for RBI’s functioning and the proposal will likely to discuss in its board meeting on November 19, sources privy to the matter told CNBC-TV8.
Tensions between the RBI and the government have recently escalated, with the finance ministry initiating discussion under the never-used-before Section 7 of the RBI Act, which empowers the government to issue directions to the RBI governor.
Last month, RBI deputy governor Viral Acharya had in a speech talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy.
The new regulations could aim at making RBI a board managed institution, said the sources, adding that it also establishes the authority of RBI board and will end the control of the committee of central Board.
Reacting to the news, former finance minister Yashwant Sinha said, "I hope it is wrong because if it is true it will be disastrous for the integrity of the financial system of the country."
Tensions were expected to come to a head at Monday's meeting as government representatives on the board appeared to be ready to turn up the heat on governor Urjit Patel and accuse the RBI of being intransigent in the face of government demands.