Amid speculation that the government may have invoked a hitherto unused section to overrule the Reserve Bank of India (RBI) on the pretext of “public interest”, the central bank has shot back with its own definition of “public interest”.
Reserve Bank Deputy Governor N.S. Vishwanathan, in a recent speech, said when a bank is trying to recover loans from borrowers, it is actually trying to get back depositors’ money and it is not a case of “ruthless big bank” versus “hapless borrower”.
“A correct portrayal of the situation would be: public interest (i.e. depositors and taxpayers) versus borrowers’ interest,” Vishwanathan said at XLRI Jamshedpur in a speech on October 29 that was posted on the bank’s website late on Friday.
It is speculated that the government, in certain cases where it differed with the bank, has invoked Section 7 of the RBI Act that empowers the government to consult the RBI Governor and direct the RBI to act on issues that it considers necessary in public interest.
One of the vexed issues between the two is related to RBI’s February 12 circular on stressed assets wherein the RBI has ordered banks to initiate bankruptcy proceedings against all large accounts above Rs 2,000 crore if a resolution plan was not met in 180 days.
Here, the government wants some relief for the stressed assets in the power sector, saying it is different from the other sectors as there are several external factors beyond the promoter’s control that turned it into a defaulter and should be given a special consideration.