English हिन्दी
Connect with us

Latest business news

Centre to step up pressure on RBI, Governor Urjit Patel may quit on Nov 19 – says a report

Published

7 years ago

on

Urjit Patel

[vc_row][vc_column][vc_column_text]The Centre wants RBI to transfer Rs 3.5 lakh crore to the finance ministry for recapitalisation of banks and to meet its other fiscal needs and media reports say it would invoke the never-before-used Section 7 of the RBI Act that allows it to dictate policy to the central bank.

This has been severely criticised by several experts, and a report in The Wire said it was “puzzling” since the actual contingency reserves on the RBI’s balance sheet is Rs 2.5 lakh crore which is roughly 6.5% of the central bank’s assets. “So one doesn’t know the origin of the Rs 3.5 lakh crore figure being cited by finance ministry,” said The Wire.

However, other media reports said the finance ministry is seeking to transfer a surplus of Rs 3.6 lakh crore, while the RBI reserves are Rs 9.59 lakh crore. The amount sought by the Centre amounts to more than a third of these reserves, these reports said.

The RBI has rejected the proposal stating that such a move could have an adverse effect on the macroeconomic stability and with low capital, RBI could end up losing its credibility, The Indian Express (IE), citing sources, had reported earlier.

What is more, according to IE report, sources said the ministry proposed that from 2017-18, the RBI should transfer the entire surplus to the government after taking into account its capital requirement. This is another area where the government and the RBI differ.

Reuters reported yesterday that according to three sources familiar with the government’s thinking, the Centre intends to keep pressing demands for the country’s central bank to relax lending curbs and hand over surplus reserves even if it risks provoking a resignation by the bank’s governor.

While there appeared to be a partial truce last week when the government said it respected the autonomy of the RBI, the sources said the government will turn up the heat at the bank’s central board of directors meeting on November 19.

RBI Governor Urjit Patel will be a key focus of the pressure from a group of directors who support the government’s position, according to the New Delhi-based sources, who declined to be named due to the sensitivity of the matter, said the Reuters report.

“We want the RBI governor to accept the priorities of the economy and to discuss these with board members,” said one of the sources, a senior government official with direct knowledge of deliberations. “If he wants to take decisions unilaterally, it will be better for him to quit.”

Investors and traders warn that if Patel quits it will create uncertainty and undermine India’s already-weak financial markets, the Reuters report said. They have been hurt in recent weeks because of defaults by a major financing company.

A finance ministry spokesman declined to comment for this story. The RBI did not respond to an email seeking comment.

Tensions between the Centre and RBI came to the fore last month when RBI Deputy Governor Viral Acharya gave a speech that blew the lid off a fractious dispute between the bank and the government of Prime Minister Narendra Modi on issues ranging from lending curbs to who controls the institution’s reserves.

Acharya said that undermining central bank independence could be “potentially catastrophic”, and he even cited meddling by the Argentine government in the affairs of its central bank in 2010 – prompting big drops in that nation’s financial markets – asa sign of how bad things can get.

For its part, government officials say they have been increasingly frustrated by the intransigence of Patel and his team to address its demands and engage in constructive dialogue.

The RBI has consistently pushed back against calls from the government to hand over more money from its reserves to help fund the fiscal deficit.

The Finance Ministry is seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government, said Reuters. The government feels RBI has over-estimated its capital reserves requirements resulting in excess capital of Rs 3.6 lakh crore.

That’s why, said the Reuters report, it has proposed these funds be used to recapitalise public sector banks, help them expand their loan book and come out of the Prompt Corrective Action framework.

The RBI, however, feels strongly that using central bank reserves has pitfalls.

The ruling BJP is also keen to reduce curbs on the shadow banking sector and increase overall lending to small and medium-sized businesses. The aim is to help offset economic headwinds from low farm prices and high fuel prices ahead of a general election due by next May and key state elections in a few weeks.

“We will do everything to protect the interests of the economy,” one of the members of the RBI central board told Reuters, noting the governor and his team would have to “explain, defend and justify” their decisions at the board meeting.

It is unclear, though, how the government will seek to exert pressure through the RBI’s Central Board as the body is a largely symbolic one, which has never had a direct say in the bank’s directives and policies, according to two additional sources with knowledge of the law under which the central bank operates.

“The role of the board has typically been to supervise the workings of the RBI, like internal audit and recruitment. But the RBI is not really accountable to the board for regulatory and operational issues,” said one of the sources, saying this would only change if the government invokes Section 7 of the RBI Act.

“We don’t know whether the board will supersede the RBI in that case,” said the source. “This kind of situation has never arisen before.”

“Patel and his team must recognise the period of an invisible RBI board is over,” one of the New Delhi-based sources said, noting that the RBI will sooner or later have to fall in line.

Patel’s predecessor Raghuram Rajan defended the RBI’s call for autonomy saying that the central bank’s responsibility is to secure financial stability and it has the right to say “no” to government proposals that could lead to instability.

“The RBI is something like a seatbelt,”Rajan, who is a professor at the University of Chicago Booth School of Business, told CNBC-TV18.

“As a driver, being the government, it has the possibility of not putting on the seatbelt, but of course, if you don’t put on the seatbelt, you can get into an accident which can be quite severe,” he said.

NR Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi-based think tank that is partly funded by the finance ministry, said the RBI and the government were dealing with the same problem though there was a difference of opinion on how to solve it.

“While the government is looking for short-term solutions, the RBI is focused on long term solutions,” he said, adding that despite disagreements, both could resolve their differences. “If the RBI governor is forced to resign, it will be a huge setback for the economy.”

Reportedly, it was only in the last few weeks that the government has threatened to invoke its most lethal weapon, Section 7 of the RBI Act. According to the Act, the government may from time to time, the government may give directions to the RBI, after consultation with the governor on matters of public interest. While the Finance Ministry in its press statement did not explicitly state the section, but the usage of words like “public interest” did shed light on the ongoing tussle between the two entities.[/vc_column_text][/vc_column][/vc_row]

Related Topics:
Continue Reading

India News

Union Budget 2026 highlights: Nirmala Sitharaman Raises Capex to Rs 12.2 Lakh Cr, West Bengal Gets Major Allocation

Finance Minister Nirmala Sitharaman is presenting the Union Budget 2026 in Parliament today. Follow this space for live updates, key announcements, and policy insights.

Published

5 days ago

on

February 1, 2026

By

Finance Minister Nirmala Sitharaman arrives to present Union Budget 2026

Finance Minister Nirmala Sitharaman will shortly present the Union Budget 2026 in the Lok Sabha, marking her ninth consecutive Budget. The annual financial statement is expected to outline the government’s policy priorities, reform agenda and spending plans for the coming year. Stay tuned for live updates, key announcements and immediate reactions as the Budget speech unfolds.

Finance Minister Nirmala Sitharaman tabled her ninth Union Budget today, beginning her speech at 11 am.

Nirmala Sitharaman is set to present her ninth Union Budget today, with the finance minister scheduled to begin her speech at 11 am.

Budget 2026 live updates: Presenting the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman said the occasion coincided with Magh Purnima and the birth anniversary of Guru Ravidas. She noted that over the past 12 years, India’s economic journey has been defined by stability, fiscal discipline, sustained growth and moderate inflation.

The budgeted fiscal deficit for fiscal 2026 is estimated at 4.4 per cent of gross domestic product (GDP)

Planned capital expenditure this fiscal year Rs 11.2 lakh crore

Rare earth corrdiors in Odisha and Kerala

Hi-tech tool rooms to be set up by PSUs

Construction equipment scheme to be launched

Container manufacturing scheme for Rs 10,000 crore over 5 years

Rs 10,000 crore SME Growth Fund

Semi-conductor mission to get Rs 40,000 crore

Rs 12.2 lakh crores for infrastructure development

Dedicated RITES to repurpose land of Central PSUs

20 new waterways over next 5 years to be connected

7 high-speed corridors on rail

High-level committee on banking for next phase of Viksit Bharat

Capital expenditure hike of to ₹12.2 lakh crore in Budget 2026, with West Bengal receiving a significant share of allocations.

Mahatma Gandhi Gram Swaraj Initiative aimed at boosting the khadi, handloom, and handicrafts sectors.

High-speed rail corridors: Mumbai-Pune, Pune-Bengaluru, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, Varanasi-Siliguri, Pune-Hyderabad

Five university campuses to be established near industrial corridors

Lakpati Didi program expanded in Budget 2026 to reach more beneficiaries across India.

Fiscal deficit for FY26 revised to 4.4%; Budget Estimate for FY27 set at 4.3%.

TCS on overseas tour packages cut to 2% to ease travel costs

Tax holiday to foreign companies that provide cloud services by setting up data centres in India till 2047

17 cancer drugs exempted from import duties

Continue Reading

India News

Union budget 2026 to be presented on Sunday with special trading session

The Union Budget 2026 will be presented on a Sunday for the first time in over two decades, with NSE and BSE announcing special trading sessions for the day.

Published

6 days ago

on

January 31, 2026

By

Nirmala Sitharaman

For the first time in more than two decades, the Union Budget will be presented on a Sunday. Finance Minister Nirmala Sitharaman is scheduled to table the Union Budget for 2026 in the Lok Sabha on February 1 at 11 am, even as the day is usually observed as a holiday for government offices and financial markets.

February 1 falls on a Sunday this year, raising questions about market operations and investor response. To ensure uninterrupted trading and immediate market reaction to budget announcements, stock exchanges have announced special arrangements for the day.

Markets to remain open on budget day

Both the National Stock Exchange and the Bombay Stock Exchange have confirmed that markets will remain open on February 1. The NSE has announced a special trading session, with the pre-open market scheduled from 9 am to 9:08 am, followed by normal trading hours from 9:15 am to 3:30 pm.

The BSE has also declared the day a special trading day, with regular market hours applicable. Trading is expected to continue across equity, derivatives, and futures and options segments.

What the Sunday budget means for investors

A weekend budget presentation is seen as offering certain advantages for market participants. With trading active on the same day, investors will be able to respond to policy announcements immediately rather than waiting for the next working day.

The Sunday timing also gives investors, analysts, and financial institutions additional time to go through detailed proposals, including tax changes, fiscal deficit targets, and sector-wise allocations. The extended window for analysis may help reduce sharp, headline-driven reactions and encourage more informed decision-making.

With fewer competing developments on a non-working day, budget announcements are also expected to receive more focused attention from markets and stakeholders.

Parliamentary schedule and key milestones

The Economic Survey is expected to be tabled on January 29, ahead of the budget presentation. The Budget Session of Parliament began on January 28 with the President’s address to a joint sitting of the Lok Sabha and Rajya Sabha.

The upcoming budget will mark Nirmala Sitharaman’s ninth consecutive Union Budget. It will also be India’s 80th budget since Independence. Since 2017, Union Budgets have been presented at 11 am on February 1, following a timing change introduced during the tenure of former finance minister Arun Jaitley.

Continue Reading

India News

Modi says right time to invest in Indian shipping sector; meets global CEOs

Published

3 months ago

on

October 29, 2025

By

PM Narendra Modi

Prime Minister Narendra Modi on Wednesday exhorted global investors to take bets on the Indian shipping sector, pointing out that this is the “right time” for such a move.

The Prime Minister also met a select chief executives of global majors, including DP World and APM, at a specially convened meeting on the sidelines of the India Maritime Week 2025 held here.

“For all of you hailing from different countries, this is the right time to work in the Indian shipping sector and also expand (your presence),” Modi said during a public address before the closed-door meeting with CEOs.

Modi listed several targets being chased by India in the maritime sector over the next few years, and underlined the importance of the global community in the same.

“You all are an important partner who will help us achieve all our aims. We welcome your ideas, innovations and investments,” Modi said.

He said that India allows 100 per cent foreign direct investment in the shipping and ports sector, and also provides incentives under the “Make In India, and Make For The World” vision.

Addressing an audience, including leaders of various companies, the Prime Minister affirmed India’s commitment to strengthening the supply chain resilience at a global level.

He also said that India is engaged in creating world-class mega ports, and cited the work undertaken on the Vadhavan Port to the north of the financial capital, which entered the top-10 firms in the world on the first day.

The government is also looking to grow the capacity at 12 major ports by four times and increase India’s share in containerised cargo at the global level.

Later, Modi held a meeting with top CEOs of shipping sector companies from across the world.

As per people in the know, he met AP Moller-Maersk Chairman Robert Maersk Uggla, DP World Group Chairman Sultan Ahmed bin Sulayem, Mediterranean Shipping Company Chief Executive Soren Toft, Adani Ports and SEZ Managing Director Karan Adani and French company CMA-CGM’s Senior Vice President Ludovic Renou.

The participation from over 85 countries in the IMW sends a strong message, Modi said, noting the presence of CEOs of major shipping giants, startups, policymakers, and innovators at the event.

The Prime Minister also thanked Port of Singapore (PSA) for the nearly Rs 8,000 crore investment in the Jawaharlal Nehru Port Authority’s fourth terminal, pointing out that this is also the largest FDI in the port sector in India.

Modi said more than 150 new initiatives have been launched under the ‘Maritime India Vision’, resulting in nearly doubling the capacity of major ports, a substantial reduction in turnaround time, and a new momentum in cruise tourism.

—PTI

Continue Reading

Trending

© Copyright 2022 APNLIVE.com