Discussions on invoking Section 7 unfortunate: Ex-RBI deputy governor

New Delhi: Former Reserve Bank of India (RBI) deputy governor Rama Subramaniam Gandhi, between 2014 and 2017, amid the debate surrounding Reserve Bank’s autonomy and the government’s alleged involvement in its operations, believes it is just difference of opinion.

Gandhi also termed the entire discussion around invoking Section 7 of the RBI Act as unfortunate. The former deputy governor told PTI, “There is nothing new in such a debate.”

Section 7 of the RBI Act gives special powers to the central government to issue directions to the Reserve Bank governor on issues of public interest.

“Such a situation will not arise if the government and RBI engage in talks at regular intervals. The ongoing debate is an indication that there have been some problems in this process. If there are talks, all issues will be resolved”, said Gandhi.

Regarding the transfer of surplus reserves to the exchequer, he observed that the central bank, after completing its annual audit, gives due share to the government. The central bank has a massive Rs 9.59 lakh crore reserve, and if reports are to be believed the government wants it to part with a third of that fund — an issue which along with easing of norms for weak banks and raising liquidity has brought the two at loggerheads in the recent weeks.

“Governments look at many issues with a short-sighted vision whereas the RBI has to take into account the mid and long-term picture. Therefore, disagreements may arise on an issue due to the difference of viewpoints or according to priority to a particular sector. Difference of opinion is a sign of a healthy environment. Decision on contentious issues is always good if taken after intense debate and discussions. Having different points of view is a sign of a healthy situation. Decisions taken after debate and discussion are generally good. Therefore, I do not consider the ongoing debate as wrong,” Gandhi said.

According to Gandhi four years ago, then RBI Governor Raghuram Rajan had suggested that a formula or model should form the basis for fund transfer to the government. But at that time, the Centre was not prepared to accept it. Gandhi said that today the government is demanding the same.

“I feel the RBI will also agree to this (formula for capital framework with RBI). However, there should be a discussion on the elements and principles of the proposed formula. Once it is framed, the RBI will abide by it,” he added.

He said that it is not necessary that all issues will be resolved in the RBI’s board meeting on November 19. Some issues may be taken up at a later date for amicable solution. Besides, Gandhi said the recent depreciation in the value of the rupee was not a cause of worry, and India’s economy rests on sound fundamentals.

(With inputs from PTI)