RBI Governor Urjit Patel may not quit, resignation reports baseless

Arun Jaitley

According to the RBI, if repayment is delayed by even one day, the account should be seen as stressed and the banks would be required to initiate resolution. If it's actually invoked, it could undermine the RBI's autonomy and RBI Governor Urjit Patel reportedly may step down.

Quoting a source, the report said that there has been an "irreversible breakdown between the RBI governor and the government". Sentiments are already weak in the market.

Finance Minister Arun Jaitley has, however, blamed the RBI for failing to stop a lending spree between 2008-2014 that left banks with huge bad debts, inflaming a row that recently erupted between the government and the central bank.

"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. The Economic Affairs Secretary on Wednesday, however, refused to comment anything with respect to it.

CII noted that RBI must work out further credit lines to provide sufficient liquidity as otherwise a severe credit crunch will dent consumer demand and growth of Indian economy.

"The autonomy for the Central Bank, within the framework of the RBI Act, is an essential and accepted governance requirement".

The Centre has invoked Section 7 of the BI Act that empowers it to give instructions to the RBI Governor in order to act on certain issues. "This is equally true of all other regulators".

Relaxation of lending norms: Non-official directors of the central banking institution have been demanding a slackening "MSME forbearance" (micro, small and medium enterprises).

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

However, the statement did not mention about the government citing the never-before-used power of issuing directions under the Act to RBI governor to seek a resolution to differences with the Central bank. What is the need to invoke the provision now?

The Finance Ministry said that it has never made public the subject matter of consultations with the apex bank. "It shows that government is hiding facts about the economy and is desperate (sic)", he said in a series of tweets.

From the tone of Acharya's speech, it appeared that the RBI is under tremendous pressure to hand over its surpluses squirrelled away over years and hence its decision to take the issue to the people. "The government will continue to do so", it added. "We appeal to all right-minded people and experts to speak out and persuade the government to amend, and let RBI do its jobs in an unfettered was as per statutes, mandates, practices".

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