Published: Wed, October 31, 2018
Business | By Eloise Houston

RBI governor Urjit Patel may resign, say reports

RBI governor Urjit Patel may resign, say reports

The following development surfaces soon after there were reports of a rift between the RBI Governor and the government. Economic Affairs Secretary Subhash Chandra Garg declined to comment, while Finance Secretary Hasmukh Adhia said it was for the Department of Economic Affairs to clarify on Section 7 of the law.

"The central government may from time to time give such directions to the bank as it may, after consultation with the governor of the Bank, consider necessary in the public interest", the law reads.

Reserve Bank of India (RBI) governor Urjit Patel may consider resigning + from his post given a breakdown in relations with the government +, TV channels reported on Wednesday, sparking a sell-off in the rupee and bonds.

Reports suggest that the Centre has sent letters to the RBI invoking Section 7 of the RBI Act on Wednesday, 31 October, allowing it to issue directions to the central bank governor on matters of public interest.

Reacting to the reports, former finance minister P Chidambaram tweeted that if the Government had "issued unprecedented directions", then there would be "more bad news today".

India has cited a never-used legal provision in trying to resolve disagreements with the nation's central bank, which could lead to the government directing the monetary authority to do its bidding if invoked, people with knowledge of the matter said.

Government officials believe that RBI Governor Urjit Patel has some responsibility for the controversy, and he can not expect an extension of his current three-year term - which ends next September - "as his right", one of the officials added.

Acharya's speech comes after a long-running tug of war between the government and the RBI over whether the central bank should part with some of its Rs 3.6 trillion ($48.93 billion) reserves to fund the country's fiscal deficit.

Modi's government is pushing the central bank to relax lending norms for small businesses and pump more liquidity into the market to bolster economic growth before key state elections due in the next few weeks and the general election. The RBI also opposed a suggestion by the government's inter-ministerial committee to set up an independent regulator for payment systems.

Public sector banks: Following the Nirav Modi-Punjab National Bank case, the RBI and Centre began pointing fingers at each other.

The Asian Age said in an editorial that 'it seems like the government would like to use the RBI as its piggy-bank to be broken when required.

The official in the prime minister's office said Patel could face a tough time when he appears before a parliamentary standing committee on November 12.

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.

Another government official told Reuters that it was vital that what happened between the government and RBI was kept confidential.

This temporarily takes away the RBI's independence and autonomy. "It shows that government is hiding facts about the economy and is desperate".

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