RBI Governor Urjit Patel may not quit, resignation reports baseless

New Delhi: Amidst the alleged ongoing rift between the government and RBI, sources have said that RBI Governor Urjit Patel will not quit from his post.

Sources told Zeebiz that the reports of his resignation are utterly baseless.

The Central Bank Governor has called for a board meeting on November 19 to discuss the pending issues and also discuss on the issues that have led to a tug-of-war kind of situation beteween RBI and government.

Finance Ministry issues statement

The Finance Ministry on Wednesday  emphasised on “public interest” and “requirements of economy” as the guiding force for both the parties, adding that it has never made consultations with the central bank public.

Issuing a statement, the Finance Ministry said, “The autonomy for the Central Bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this. Both the Government and the Central Bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy.”

The Finance Ministry said that it has never made public the subject matter of consultations with the apex bank.

“Extensive consultations on several issues take place between government and RBI from time to time. This is equally true of all regulators. Government has never made public the subject matter of those consultations. Only final decisions are communicated. The Government, through these consultations, places its assessment on issues and suggests possible solutions. The Government will continue to do so,” Finance Ministry statement said.

Section 7 of RBI Act

The government statement comes after reports that it has invoked never-before-used powers under Section 7 of the RBI Act that empowers the government to consult and give instructions to the central bank governor to act on certain issues that the government considers serious and in public interest.

What led to the current chaos?

The rift between the RBI and the government has spilled into the public domain 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.

Recently, Finance Minister Arun Jaitley blamed the central bank for failing to stop a lending spree during 2008-2014 that left banks with $150 billion of bad debt.