Letter to BS: Govt should be careful in exercising powers under Section 7

It will be seen as a definite step towards eroding the powers of the central bank

This refers to “Can govt direct central bank on policy and regulation? Yes, says RBI Act” (August 28). The Section 7 of the RBI Act 1934, as you rightly pointed out, does empower the government to issue directions to the Reserve Bank of India (RBI), after consultation with the governor, if considered necessary, in public interest. It has not been done till date. The moot question is whether the public interest will be served by issuing directions to the RBI by telling it to dilute its regulatory instructions regarding non-performing assets so as to reduce their impact on a particular