Published: Wed, November 07, 2018
Economy | By

RBI governor Urjit Patel could resign on November 19

RBI governor Urjit Patel could resign on November 19

Moneylife's report said if the feud escalates further, there is "a good chance" Patel will resign at the RBI's next meeting, saying he was exhausted of the struggle with the government, and it was having a negative impact on his health.

On reports that the government might have imposed Section 7 of the RBI Act curtailing its autonomy, he said it is unlikely that any such step has been taken, suggesting that both the government and the RBI should respect each other's motivation and thoughts. The RBI did not respond to an email seeking comment.

The story was written by veteran Indian financial journalist Sucheta Dalal who is well known for her investigative reporting. The government had then appointed Urjit Patel as his successor. The aim is to help offset economic headwinds from low farm prices and high fuel prices ahead of a general election due by next May and key state elections in a few weeks.

These issues may figure during the RBI's board meeting on November 19. The central bank is of the view that the use of its reserves will hurt the government's commitment to fiscal prudence.

He said, "The role of the central bank is to be the wise counsel, like Dravid, not to make operational decisions and certainly not be loud like Navjot Sidhu".

"We don't know whether the board will supersede the RBI in that case", said the source.

Sources have also claimed that the ministry has proposed that from 2017-18, the RBI, after taking into account its capital requirement should transfer the entire surplus to the government - a point of contention between the two bodies. "Patel and his team must recognise the period of an invisible RBI board is over", one of the New Delhi-based sources said, noting that the RBI will sooner or later have to fall in line. "India can't have a breakdown in dialogue between Central Bank and government", the report added.

The government recently called for the RBI to relax its lending restrictions on some banks, and Centre has also been trying to trim the RBI's regulatory powers by setting up a new regulator for the country's payments system. "As a driver, being the government, it has the possibility of not putting on the seatbelt, but of course, if you don't put on the seatbelt, you can get into an accident which can be quite severe". Previous governors too had occasionally pointed out the government's overreach, when it came to the functionality of RBI.

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