Rupee Drops on Speculation of Worsening RBI-Government Tension

Rupee Drops on Speculation of Worsening RBI-Government Tension

"It might be better if the time-honored practice of the finance minister and the governor of the RBI meeting often in private and talking issues". Economic Affairs Secretary Subhash Chandra Garg declined to comment, while Finance Secretary Hasmukh Adhia said it was for the Department of Economic Affairs to clarify on Section 7 of the law.

Under Section 7 of the RBI Act of 1934, "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 RBI has put lending curbs on some weak state-run banks, while the government - facing an election early next year - wants to ensure banks continue to lend to boost economic growth.

The letters were sent at least a month before Acharya's speech, an official told BloombergQuint.

With the war between the Narendra Modi-led NDA government and the Reserve Bank of India (RBI) escalating, there is apprehension that the government may invoke Section 7 of the RBI Act.

Reacting to the reports, former finance minister P Chidambaram tweeted that if the Government had "issued unprecedented directions", then there would be "more bad news today".

This section has never been invoked in the history of independent India despite numerous clashes between the government and the RBI over the years. "What is the need to invoke the provision now?"

Government officials believe that RBI Governor Urjit Patel has some responsibility for the controversy, and he can not expect an extension of his current three-year term - which ends next September - "as his right", one of the officials added.

Anderson into ATP Finals after Vienna Open win over Nishikori
Another break early in the second set was enough to ensure victory against his 71st-ranked opponent. A victor of 11 events, Nishikori hasn't triumphed since winning in Memphis in February 2016.

The development comes amidst growing rift between the centre and the central bank after the RBI deputy governor Viral Acharya, in a fiery speech, warned that undermining a central bank's independence could be "potentially catastrophic".

Both these subjects have proven to be contentious issues in recent RBI board meetings, with non-official directors like S Gurumurthy in particularly forcefully arguing for them. Among other issues are dividend payment, February 12 restructuring, regulation of public sector banks, reserves, board appointments etc.

They said the RBI should not air confidential matters in public and expressed fears it could tarnish India's image among investors.

The official in the prime minister's office said Patel could face a tough time when he appears before a parliamentary standing committee on November 12.

On Tuesday, Arun Jaitley responded, and held the central bank responsible for mounting bad loans, and said the Reserve Bank looked the other way when banks lent indiscriminately during 2008-14 to keep the economy going.

Patel had come under increasing criticism from the banking industry as well as the government over his handling of non-performing assets (NPAs) and his stance on the autonomy of the RBI.

Government official were very upset by Acharya's comments, which included a reference to problems created in Argentina when its government meddled in central bank affairs, Reuters reported.

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