RBI governor Urjit Patel may resign after rift with govt

Roman Schwartz
October 31, 2018

(1) 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.

Government official were very upset by Acharya's comments, which included a reference to problems created in Argentina when its government meddled in central bank affairs, senior sources in the administration said on Monday.

Patel and other regulators, including the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority, met Jaitley and other top finance ministry officials at a meeting of the Financial Stability and Development Council on Tuesday to discuss the liquidity crunch.

"The political dysfunction is yet further excuse for foreigners to head for the hills, sustaining pressure on INR", said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong.

The latest development follows a Friday speech by Deputy Governor Viral Acharya warning of the risks of political leaders encroaching on the central bank's independence. The RBI also opposed a suggestion by the government's inter-ministerial committee to set up an independent regulator for payment systems.

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According to reports, sources said that Letters of Consultation under Section 7 of the RBI Act were invoked 3 times.

The government has invoked never-before-used powers under the RBI Act that allow it to issue directions to the central bank governor on matters of public interest, the Economic Times newspaper reported.

India's highest-circulation English-language paper, the Times of India, wrote in an editorial that curbing the RBI's autonomy or removing RBI Governor Urjit Patel would trigger a mass exodus of investors and 'the government must not contemplate it even in its dreams'. What's interesting is that the following Section of the RBI Act has never been used by any government post the independence of India.

BJP slammed Rahul Gandhi for his criticism against Prime Minister Narendra Modi over the RBI-Centre rift, and said that it reflects Congress party's grounding, "which is fast eroding in national politics".

Union Finance Minister Arun Jaitley during a press conference in New Delhi. The report, which has not received any by official confirmation, said that the government is keen on a bureaucrat as the next governor if Patel resigns. According to ET Now, Patel had told government not to "raid RBI reserves", as government was keen on the transfer of reserves to fill up its fiscal deficit amid NPA stress.

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