RBI governor Urjit Patel may consider resigning after rift with govt

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This is equally true of all other regulators. Subsequently, the RBI was unhappy with FRDI bill and the government stand on asset quality rating (AQR).

Acharya in fact began his speech invoking the experience of Argentina's central bank chief in 2010, when he chose to resign from his post. When such a measured perspective of an independent central bank as a key element of durable economic prosperity is missing and/or government myopia so rife as to lead to regular inroads into central banking apparatus and decisions, unfortunate accidents can arise.

Sources, however, insisted that the government has not taken any action of issuing any specific direction and has only initiated consultations with the central bank on unresolved issues.

The Confederation of Indian Industry (CII) on Wednesday said that the financial sector is going through a phase of stress and put out a detailed paper with ten recommendations including seeking intervention from the banking regulator, Reserve Bank of India. This section has never been invoked before, not even during India's most trying economic crises. Government officials have recently called for the RBI to relax its lending restrictions on some banks, and the government has also been trying to trim the RBI's regulatory powers by setting up a new regulator for the country's payments system, said a Reuters report dated October 27, 2018.

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The government statement on Wednesday although seemed like an attempt to douse the flames of disagreement between itself and RBI that pretty much happened due to its own doing. "They kept pushing the truth below the carpet", he said. Giving control of the Reserve Bank of India to its Board of Directors effectively gives this control to thel government.

The rift between the RBI and the government turned ugly after RBI Deputy Governor Viral Acharya last week went public saying undermining a central bank's independence could be "potentially catastrophic". "Even the RBI board is being sought to be stuffed in a particular direction, which would prompt the discerning people to look askance and make it hard for RBI to frame policies", the union said in the letter. The senior Congress leader said that the governments he was a part of in the past had never used Section 7 of the Reserve Bank of India Act of 1934, under which a direct order can be issued by the government to the central bank to carry out its wishes in "public interest".

"While objectives of both the government and the RBI appear to be the same as far as the question of tackling NPA is concerned, there seems to be a large difference in their approaches, which is apparently creating a tussle between the two institutions", N.R. Bhanumurthy, professor at National Institute of Public Finance and Policy (NIPFP), told The Wire.

Patel and his deputy governors are expected to meet top finance ministry officials on Friday.

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