Tuesday, 20 November, 2018

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

RBI governor Urjit Patel may consider resigning: sources Urjit Patel may resign as Jaitley’s remarks widen RBI-govt rift: Report
| 31 October, 2018, 11:58

Meanwhile, it also emerged that the government had invoked Section 7 of the RBI Act at least invoked 3 times.

Though differences between the government and RBI have peaked this year over a number of issues, including the central bank's handling of the Nirav Modi crisis and the latter's firm stand on bringing weak banks under prompt corrective action, the latest reason for the escalation is the liquidity crisis being faced by NBFCs.

CNBC-TV18 said all options are on the table for Reserve Bank of India Governor Urjit Patel, citing people it didn't identify. Following this, the finance minister blamed the RBI for its lending spree between 2008 and 2014 that left banks with huge debts. "There have been talks with the RBI on these issues, but invoking Section 7 (1) is something that has not come up yet but we need to also ensure that industries are not killed", he added.

RBI deputy governor Viral Acharya, pressing for independence of the central bank, said that lack of autonomy prevents it from regulating public sector lenders, the Times of India reported. The following development surfaces soon after there were reports of a rift between the RBI Governor and the government. First letter under Section 7 followed Allahabad court's verdict in RBI versus Power companies. Second letter, the report added, was on using RBI's capital reserves and the third letter was on relaxing constraints on PCA banks for loans to SMEs.

The statement further stated that, "Government of India has never made public the subject matter of those consultations". Arguing against the Centre's proposal, the RBI had said, "The digital payments have made good and steady progress".


However, there was no sign of resignation by Patel at the meeting, officials 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.

With the war between the Narendra Modi-led NDA government and the Reserve Bank of India (RBI) escalating, there is apprehension that the government may invoke Section 7 of the RBI Act. While refusing to divulge the contents of the letter, Gurumurthy told The Economic Times that he had objected to "Acharya going public on issues not discussed in or disclosed to the board which met just two days earlier".

Mumbai: The rupee pared losses against the United States dollar on Wednesday after the government said that it respects the Reserve Bank of India's autonomy.

"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", Section 7 of the RBI Act reads.

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