Government vs RBI: All you need to know about Section 7 of the RBI Act

The government has sent letters to the Reserve Bank of India (RBI) seeking consultations on key regulatory issues under a never-before-used provision in the law, according to sources.

The government has written to the RBI hinting it may invoke Section 7 of the Reserve Bank of India Act 1934 – a provision that has never been used since the inception of the law – to issue directions on relaxing prompt corrective action (PCA) norms, liquidity to non-banking financial companies (NBFCs), among others, sources said.

What does Section 7 of the RBI Act say?

According to it, the Central government may