- Rajesh Tyagi/ Nov 2, 2018
The Central Government has recently invoked Section 7 of the RBI Act of 1934, in a series of letters directing the RBI to act in a particular way. Section 7 empowers the Central Government to issue directions to the RBI and obligates the RBI to comply with them. Section 7 was not invoked even during the default crisis of 1991 or the financial crisis of 2008.
The extraordinary measure has come on the heels of upcoming general elections in 2019.
The pressure upon the Government from the credit dried Non Banking Finance Companies had in fact fetched the imperative for the move.
After the recent IL&FS crisis in September has necessitated the raising of safeguards in credit and recovery regime in banking and non-banking finance, the lending majors have gone dry in no time. Liquidity for NBFCs emerged as the stumbling block in finance business.
The Central Government has recently invoked Section 7 of the RBI Act of 1934, in a series of letters directing the RBI to act in a particular way. Section 7 empowers the Central Government to issue directions to the RBI and obligates the RBI to comply with them. Section 7 was not invoked even during the default crisis of 1991 or the financial crisis of 2008.
The extraordinary measure has come on the heels of upcoming general elections in 2019.
The pressure upon the Government from the credit dried Non Banking Finance Companies had in fact fetched the imperative for the move.
After the recent IL&FS crisis in September has necessitated the raising of safeguards in credit and recovery regime in banking and non-banking finance, the lending majors have gone dry in no time. Liquidity for NBFCs emerged as the stumbling block in finance business.
