RBI Governor Urjit Patel may not quit, resignation reports baseless

Anna Jefferson
October 31, 2018

But it was unclear if it had used powers for the first time under the RBI Act to give the bank instructions.

"RBI may also revisit the lending restrictions of PCA banks and consider allowing them lending to NHB which in turn can use it to finance housing projects", said CII in its recommendations.

As per the Section 7 of the RBI Act, the Central Government is entitled to give directions to the Central Bank after it consults the RBI Governor. Anonymously-sourced media reports indictated also that the finance minister would not go through the step.

Top sources indicated that the Central government played hardball and made things hard for the Central bank.

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Acharya in fact began his speech invoking the experience of Argentina's central bank chief in 2010, when he chose to resign from his post. "I am surprised that at that time, the government looked the other way, the banks looked the other way".

Although the government has issued a press statement on Wednesday afternoon in a bid to clarify controversy surrounding invocation of section 7, sources said the tussle has been going on for quite some time and it all started with "forced demonetisation" by the government in 2016.

However, there was no sign of resignation by Patel at the meeting, officials said. Giving a cricketing analogy, Acharya had said a government's horizon of decision-making was rendered short, like the duration of a T20 match, by several considerations. As elections approach, delivering on proclaimed manifestos of the past acquires urgency; where manifestos can not be delivered upon, populist alternatives need to be arranged with immediacy.

Sources within the government and the RBI said that, over the last few months, the two sides had held discussions on various issues, including easing of norms under the prompt corrective action framework for weaker banks. Government officials were left unhappy with Archarya's speech.

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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.

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. Bond yields and prices move in opposite directions.

The industry body said that Reserve Bank of India needs to open limited special liquidity window (open direct lines of credit as RBI had opened liquidity window for mutual funds for a short-period in 2008 and 2013) to meet emergencies of financial Institutions including mutual funds which have been significantly impacted.

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