INSUBCONTINENT EXCLUSIVE:
KOLKATA: From interest rate increases, to the February 12 circular on non-performing loans, to the defiance on liquidity measures for
non-banking finance companies, the relationship between the Reserve Bank of India and the government was always frosty, which has now boiled
over.
The fact that RBI governor Urjit Patel did not freely communicate with bankers, industry captains and market participants made matters
worse between the fiscal and monetary authorities.
The rift escalated as Mint Street felt that North Block slighted it on issues such as
liquidity management following the NBFC crisis, rules for weak banks, disclosure norms for defaults which are essentially the remit of any
Central banks across the globe, including the US Federal Reserve, seem to be getting drawn into conflict with the
fact is he was under immense pressure ever since the talk of imposition of Section 7 under RBI Act began doing the rounds amid the growing
The provision empowers the government to issue directions to the RBI.
In his tenure, Patel had cut repo rate once in October 2016, but then
during the second quarter it rose by a lower quantum of 7.1 per cent.
The uneasy relationship aggravated with the government demanding
higher dividends from the RBI and questioning the need to keep excess reserves for contingencies.
Former Chief Economic Advisor Arvind
Reserve Bank is an issue, the amount of surplus transfer or the capital requirement of the Reserve Bank have never been variables in
