Modi government was after the money deposited in RBI before the 2019 elections. There are explosions one after the other. The first blast happened in 2018 when Urjit Patel resigned. Then Deputy Governor Viral Acharya made a splash. And now former Finance Secretary Subhash Chandra Garg has dropped a bombshell. Garg has said that in the meeting called on September 14, 2018, Prime Minister Narendra Modi had lost his cool on the then RBI Governor Urjit Patel and compared him to a ‘snake sitting on a pile of money’.
Former Finance Secretary Subhash Chandra Garg has made this claim in his book ‘We Also Make Policy’. The book, published by HarperCollins, is scheduled to be released in October. Garg writes in his book that after listening to presentations and discussions for about two hours with Patel and other government officials, including the then Finance Minister Arun Jaitley and Principal Secretary Nripendra Mishra, the Prime Minister could not find any solution. Garg writes that during that time the PM expressed deep displeasure. He has written that for the first time he had seen Prime Minister Modi so angry. In that meeting, the then Railway Minister Piyush Goyal, the then Additional Principal Secretary P.K. Mishra, the then DFS secretary Rajeev Kumar, Garg and the then two deputy governors of the RBI, Viral Acharya and N.S. Viswanathan was also included.
This Viral Acharya is the same one who recently created a blast by revealing the events before Urjit Patel’s resignation. This month he had claimed that the Modi government had asked for Rs 2-3 lakh crore in 2018 for pre-poll expenditure before the 2019 Lok Sabha elections. He even claimed that the Modi government had asked for the money deposited during the previous governments also. Due to these reasons, there was a situation of conflict between the government and RBI.
Viral Acharya, who served as the RBI deputy governor from 2017 to 2019, had claimed that the refusal to release the rupee triggered a clash between the central bank and the government. He has made these claims in the new preface of his book, ‘Quest for Restoring Financial Stability in India’. This book was first published in 2020.
Even when the then RBI Governor Urjit Patel and later Deputy Governor Viral Acharya had resigned, there were reports of conflict between the RBI and the government and transfer of money.
The tenure of the RBI Governor is only 3 years and Urjit Patel had resigned 9 months before the completion of his tenure. Viral Acharya had resigned six months before the scheduled time.
However, former Finance Secretary Subhash Chandra Garg has written a chapter in his book on the resignation of Urjit Patel and it mentions the events that happened before his resignation. According to the report of The Indian Express, the former Finance Secretary has written that ‘In the meeting held amidst difficult economic conditions and a lot of tension between the government and the RBI, Urjit Patel presented some recommendations – everything was for the government to do and everything was for the RBI. Nothing for him, except what he was already doing. He further writes in the book, ‘At that time, the PM lost his temper and attacked Urjit Patel. This was the first time I had seen him so angry. Garg writes, ‘He compared Urjit Patel to a snake sitting on a pile of money, because he was reluctant to allow the RBI’s reserves to be put to any use.’
According to the report, Garg has written in the book, ‘He said some seriously bitter things. He raised many such topics where the stubbornness of RBI was harming India. He also raised the issue of retained surplus money… He asked Urjit Patel, as a PM, to call a board meeting and find a solution to the issues in consultation with Arun Jaitley and the finance team, without issuing any instructions.’
Garg wrote, ‘On August 10, 2017, I participated in the first meeting of the RBI Board as an RBI Board Member, in which Rs 13,400 crore was maintained out of Rs 44,200 crore of RBI surplus for the financial year 2016-17. It was proposed to keep it. RBI had reported that around Rs 30,000 crore would be available for transfer to the government as surplus for the year 2016-17. Garg said he had asked for 100 per cent of the surplus to be transferred to the Government of India on the lines of previous years.
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Garg has written that the government’s frustration towards Urjit Patel began on February 12, 2018 when he made an extremely difficult decision to deal with the non-performing loans (NPAs) of the banking sector and take these defaulters for resolution under the Insolvency and Bankruptcy Code. Had come up with a strict formulation. Patel ultimately resigned from the post of RBI Governor on December 10, 2018, over policy differences with the government.
Let us tell you that when Urjit Patel, who remained in office despite facing criticism on decisions like demonetization, resigned in 2018, serious questions started being asked that something was wrong. During that time, when the proposal of the then Finance Ministry came to give the additional money present in the treasury of RBI to the government, the opposition of Urjit Patel, who was standing with the government, had reached its peak. As the conflict escalated, the government unexpectedly invoked Section 7 of the RBI Act. This is the section that gives the government the freedom to interfere in the work of RBI.
At that time, not only Urjit Patel was opposing the pressure of the government in RBI, Deputy Governor Viral Acharya had also started openly saying in public forums that the consequences of ending the independence of the central bank could be fatal.
Acharya used to say that it was dangerous to transfer more money than necessary from the central bank’s reserves to the government and in this regard he also gave the example of Argentina, how the bank there gave one such transfer of 6.6 billion dollars, the biggest transfer in the history of that country. It had given rise to a major constitutional disaster.
Acharya had claimed that during the year of demonetisation, the expense of printing new bank notes reduced the transfers made to the Centre. He alleged that this resulted in the government’s demand for funds intensifying ahead of the 2019 elections.
Acharya had first highlighted the conflict between the government and the RBI in a lecture in October 2018. He warned that reducing the independence of the central bank could be potentially disastrous, and said that governments that do not respect it sooner or later face the wrath of economic markets.