Former Union Finance Minister P Chidambaram has claimed that the government is determined to capture the Reserve Bank of India and control its reserves. He called the recent disagreements between the Centre and the central bank a smokescreen.

The meeting of the RBI’s Board of Directors on Monday will be a “day of reckoning” for the central bank’s independence and the Indian economy, Chidambaram tweeted on Saturday. “Nowhere in the world is the central bank a board-managed company,” the Congress leader added. “To suggest that private business persons will direct the governor is a preposterous idea.”

On November 8, Chidambaram had claimed the Centre would invoke Section 7 of the RBI Act, which gives it the power to issue instructions to the central bank, if Governor Urjit Patel refuses to yield to the government’s demands. “The government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting,” he said.

The Congress leader added that the consequences will be catastrophic if the RBI defies the government or Patel resigns.

The standoff

On October 26, RBI Deputy Governor Viral Acharya said governments that do not respect a central bank’s independence sooner or later incur the wrath of financial markets. Three days later, Reuters reported that the Centre was upset with the central bank for publicly talking about the rift.

On November 9, Economic Affairs Secretary Subhash Chandra Garg dismissed a news report that suggested the government had sought Rs 3.6 lakh crore from the central bank’s reserves.