Is RBI Governor Urjit Patel resigning?
By MYBRANDBOOK
Reserve Bank of India Governor Urjit Patel may consider resigning from his post, given a breakdown in relations with the government.
It is said that the government had sent letters to the RBI governor in recent weeks exercising powers under section 7 of the RBI Act on issues ranging from liquidity for non-bank finance companies, capital requirements for weak banks and lending to small-and medium-sized companies.
Section 7 says that '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', a statute that has not been used in independent India, according to a leading publication.
If the RBI governor resigns then it is a direct consequence of the FM blaming him publicly for NPAs. He should be persuaded to stay. 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.
Tensions between the RBI and the government have spilled into public after Deputy Governor Viral Acharya said last week that undermining central bank independence could be "potentially catastrophic", indicating the authority is pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May.
The Central government uses banks as a weapon to penetrate into jurisdiction of states, said former Reserve Bank of India (RBI) Governor Y.V. Reddy on Saturday.
He said by controlling the banking system, the government of India is having access to extra budgetary resources or unaccountable resources to penetrate into the policies which it could not otherwise do. Speaking at Indian School of Business (ISB), Reddy said since the Union government had no developmental staff in the states, banks were used to penetrate into their jurisdiction.
"Recently, we had Urjit Patel (RBI Governor) saying that regulation should be ownership-neutral. "I don't have regulatory powers but the government says RBI has enough regulatory powers. What is the truth? The truth is the problem of dual control," he said.
The governance of public sector banks and the issue of non-performing loans are expected to figure in the discussions at the FSDC, a body of financial sector regulators.
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