Reserve Bank of India Governor Urijit Patel may resign following the tussle between the RBI and the Central government, reported TV channels on Wednesday. Working adversely on the economy, the news has led to a fall in Rupee and bonds. However, the government has confirmed having extensive consultations with the Reserve Bank of India. The RBI officials decline to comment on the matter whereas, a statement from the Finance Ministry says –
“Autonomy for the Central Bank within the framework of RBI Act is an essential and accepted governance requirement. Govts have nurtured and respected this. Both govt & Central Bank have to be guided by public interest and requirements of economy,” said Finance Ministry.
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The rupee fell to 73.99 to the dollar from 73.6750 on Tuesday, after touching 74.04, its lowest since October 15, whereas, the 10-year benchmark bond yield rose to 7.87 per cent from its previous close of 7.83 per cent.
According to a report in the Economic Times, the government tried to invoke rare powers to issue directions to RBI governor on matters of public interest.
Recently government sent letters to the RBI governor where is used powers under Section 7 of the RBI Act on different issues varying from liquidity for non-banking finance companies capital requirements for weak banks to lending to small-and-medium-sized companies.
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“It is difficult to believe that the RBI governor will resign because it is unprecedented and would look quite irresponsible and (an) immature step,” said a senior trader at a foreign bank. “But it is quite worrisome to see the government trying to continuously interfere into the RBI’s operations.”
