A behind-the-scenes account of high-level differences within the Finance Ministry during the formulation of a financial package for Non-Banking Financial Companies (NBFCs) reveals serious disagreements over the role of the Reserve Bank of India (RBI) and the integrity of official procedures during budget drafting.
According to sources familiar with the matter, then-Principal Secretary to the Prime Minister, Nripendra Misra, had strongly advocated for a financial support package for NBFCs. The proposed package included two critical components: extending regulatory and resolution powers over NBFCs to the RBI, and opening a special liquidity window to provide immediate support to stressed financial institutions.
Secretary of the Department of Financial Services (DFS), Rajiv Kumar, pushed for a set of amendments to the RBI Act to be included in the Finance Bill, granting the RBI both regulatory and resolution powers. However, a senior finance official opposed this move, arguing that resolution authority should not rest with the RBI but should instead be handled through a separate resolution mechanism, similar to the now-defunct Financial Resolution and Deposit Insurance (FRDI) Bill. The official also flagged concerns about unintended clauses in the draft, including a bail-in provision and what he described as excessive penalty powers.
During this critical juncture, the official was away attending the G-20 meeting. In his absence, the DFS-proposed draft amendments were vetted and approved by the legislative department. Upon his return, he wrote to the DFS Secretary on June 30, requesting three changes to the draft. While two of these suggestions were accepted, the third — withholding resolution powers from the RBI — remained a sticking point.
Finance Minister Nirmala Sitharaman, who had just assumed office, appeared hesitant to make decisions on files with conflicting views. “She wanted the files to be clean — either signed without conflict or left unsigned,” the official noted.
With the Finance Bill deadline looming, Sitharaman summoned both Rajiv Kumar and the opposing official for a meeting on July 2. The official presented his case again, believing that the minister agreed with his stance, although he was not certain she fully grasped the distinction between regulation and resolution. She instructed the official to document his arguments further and resubmit the file.
However, Rajiv Kumar continued to push for his version of the proposal during a speech-preparation session with the Prime Minister. With Nripendra Misra siding with Rajiv Kumar, Prime Minister Narendra Modi directed that their view be accepted. The following day, the finance minister’s office returned the file with an oral message: “FS knows what is to be done.”
The file was then processed as per the Prime Minister’s decision and resubmitted to the finance minister. But Sitharaman refused to sign off on the proposal as long as the dissenting notes remained attached. According to the official, Rajiv Kumar informed him that the only solution was to remove and destroy the earlier note sheets, replacing them with freshly typed ones carrying the same dates and numbering — a practice the official said he had never permitted in his career. Nevertheless, he reluctantly agreed, citing the urgency of completing the budget process.
This episode sheds light on the deep internal divisions over critical policy choices and questions of administrative transparency during the 2019 budget cycle, revealing the frictions between bureaucracy, political leadership, and the Prime Minister’s Office.
- Stem Cell Banking Services Exempt from Service Tax: Supreme Court - July 29, 2025
- Supreme Court Disposes Plea on GST Tracking Mechanism for Foreign Service Providers, Directs GST Council to Examine Representation - July 29, 2025
- An Exhaustive Guide to Tax Laws in Mexico: Structure, Types, and Compliance - July 29, 2025
