Reports of RBI Governor Urjit Patel's possible resignation rock Indian government

Reports of RBI Governor Urjit Patel's possible resignation rock Indian government

"Both government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy".

Efforts are on to contain the fight before it turns macabre as speculations are rife that RBI governor Urjit Patel, an NDA pick, may resign.

Finance Minister Arun Jaitley, meanwhile, has blamed the RBI's inability in identifying the problem of NPAs in Indian banks and lack of timely measures for the current crisis-like situation in the banking sector.

Clarifying that the government holds "extensive consultations" with the central bank from time to time, the Centre on Wednesday said that it accepts the autonomy of the Reserve Bank of India within the framework of the RBI Act. At this crucial juncture, when markets have started recovering after NBFC turmoil and supportive global cues, the resignation of the RBI Governor Urjit Patel will rattle investor sentiment, they say.

The ongoing spat between the government and the Reserve Bank of India (RBI), if not contained, will have dire consequences on the markets, feel Dalal Street experts.

Top sources said three consultations were sent to the RBI in August, September and in the first week of October by the finance ministry. For the goal, extensive consultations take place between the government and the RBI from time to time.

In light of the very public row between the Modi govt and RBI over the latter's NPA rules, there's been talk that the govt could invoke Section 7 of RBI Act.

"Government of India has never made public the subject matter of those consultations". These letters were on the government's desire for power sector non-performing assets to be reclassified, the issue of the RBI giving dividends to the Centre, and the government's desire for the Prompt Corrective Action norms applicable for certain bank be eased so as to increase lending for the MSME sector, respectively.

From the tone of Acharya's speech, it appeared that the RBI is under tremendous pressure to hand over its surpluses squirrelled away over years and hence its decision to take the issue to the people. What is the need to invoke the provision now?

Reserve Bank of India Deputy Governor Viral Acharya's speech last week was seen by many as a clear indication of the friction between the government and the central bank, which has now properly spilled over into the public domain. "It shows that government is hiding facts about the economy and is desperate". Neither the government nor the RBI has signaled any thaw of any of these specific issues yet.

The government issued the statement to address the perception of growing differences between the finance ministry and the country's central bank.

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