RBI opposed by Government in court for the first time, says Ramesh

In a bid to safeguard the Gujarat State Petroleum Corporation (GSPC) from being declared bankrupt under the new Insolvency and Bankruptcy Code Law, the Centre for the very first has shown opposition against a circular issued by the Reserve Bank of India (RBI), as alleged by the Congress on Monday.

While interacting with the media, senior Congress leader Jairam Ramesh, as quoted by The Hindu, said, “This is the first time in independent India, in 70 years, that the Government of India challenges a circular of the Reserve Bank in a court. There are always differences between the government and the RBI, but it never [reached] a court of law.”

The RBI, on February 12 this year had a circular issued that said that companies who have bank dues of Rs 2000 crore or more would be categorised as being bankrupt if the dues didn’t get cleared within a period of 180 days.

This circular has received a lot of challenges in the Allahabad High Court by private companies who have argued saying that the 180-day period is too short a time. An affidavit was filed by the Centre against the RBI order in the High Court which said that it didn’t agree with it.

The Congress alleged that this move made by the Congress was mainly to protect the GSPC which owes Rs 12, 519 to an association of public sector banks with the leading lender being the State Bank Of India.

“I am making this statement with a full sense of responsibility that these power producers were encouraged by the Government of India to go to the Allahabad High Court to challenge this RBI circular,” Ramesh further stated, as quoted by the same source.

He also added that the SBI, being the leading lender should take action against the GSPC for it to get declared bankrupt under the Insolvency and Bankruptcy Code Law.

He further added, “This demonstrates the [Modi] government’s approach to institutions and if the RBI circular is not implemented, it will be performing the antim sansksar (last rites) and RBI would have lost all autonomy and credibility..All efforts are being made to ensure that GSPC is not declared bankrupt because if it is done, then it will be a blemish on Prime Minister Modi’s record.”

Also Read: Home loans to be more expensive after RBI’s new hike?