'RBI fought govt push for Rs 3L cr'

New Delhi, Agencies: The Reserve Bank (RBI) resisted a "raid" planned by some in the government to extract Rs 2-3 lakh crore from its balance sheet in 2018 to meet populist spending in run-up to general elections, Viral Acharya, who was deputy governor at RBI at that time, has written.

This apparently had led to differences between RBI and the government, which even contemplated invoking never-used Section 7 of the Reserve Bank of India Act to issue directions to the central bank.

Acharya who had first flagged the issue while delivering AD Shroff Memorial Lecture on October 26, 2018, in a fresh prelude to his book 'Quest for Restoring Financial Stability in India', called the exercise a "backdoor monetisation of the fiscal deficit by the central bank".

"Creative minds in the bureaucracy and the government" devised a plan to transfer substantial sums accumulated by RBI during the tenure of previous governments to the current government's account,'' he said in the prelude in the updated edition of his book first published in 2020.

"Why cut populist expenditures in an election year... when the central bank balance sheet can be raided and surging fiscal deficits essentially monetised?" he wrote.