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RBI’s powers sought to be curtailed

The central government is proposing to amend the Reserve Bank of India Act, which envisages taking away of the money market regulatory powers from the central bank and bring them under the purview of the Securities and Exchange Board of India (Sebi). The Finance Bill for the current year proposes to amend sections 45U and 45W of the RBI Act, which effectively takes away the central bank’s powers to regulate government securities and other money market instruments. According to the proposed amendment, “Any direction issued by the Reserve Bank of India, in respect of security, under chapter III D of the Reserve Bank of India Act, shall stand repealed.” If the proposed amendments go through, regulations relating to the issuance and investment of commercial papers, inter-bank repo or any other repo and reverse repo used as instruments to raise liquidity by keeping these as collateral as government securities will no longer be in RBI’s hands.

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