RBI governor may consider resigning after rift with govt

RBI governor may consider resigning after rift with govt

In a statement issued hours later through the finance ministry, the government said the RBI's independence was "an essential and accepted governance requirement".

The clarification comes amid reports said that the government has invoked Section 7 of the RBI Act that empowers the government to consult and direct the RBI to act on issues that it considers necessary in public interest.

This section has never been invoked in the history of independent India despite numerous clashes between the government and the RBI over the years.

As per a report by Economic times, in recent weeks, separate letters have been sent to RBI Governor Urijit Patel.

Indian television channels CNBC-TV 18 and ET Now both reported earlier in the day that Patel might resign.

Among other recommendations CII has suggested that RBI must encourage non banking finance companies (NBFCs) to securitize their assets which can be purchased by banks. "This is equally true of all other regulators", Ministry of Finance said in a statement issued today.

"Still it does sound like the finance ministry is trying to dial down the temperature". At 1.48 pm, the rupee pared losses to 0.38% to 73.96 a dollar.

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There is an "irreversible breakdown between RBI governor and the government", one of the source added. Delivering the AD Shroff Memorial Lecture, Acharya had called for greater powers for RBI to regulate public sector banks as it seeks to clean up the banking system.

The letter said, "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".

"If RBI's top brass exits, there is a likelihood of instability that will be perceived, and that can have an impact on the economy and the market at large".

Although the government in a bid to bring down the mounting tensions issued a statement saying that government has "nurtured and respected" autonomy of the Central bank and has been holding extensive consultations with it on many issues, the anxiety in the air was palpable. The All India Reserve Bank Employees Association backing Viral, said, "undermining the country's central bank was a recipe for disaster which the government must desist".

Finance Minister Arun Jaitley has, however, blamed the RBI for failing to stop a lending spree between 2008-2014 that left banks with huge bad debts, inflaming a row that recently erupted between the government and the central bank.

Acharya's speech is, as a result, remarkable in how well it lays out exactly what seems to be happening between the Centre and the RBI right now, especially with talk of Patel considering what Redrado did: resignation.

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