In New Delhi and Mumbai's corridors of power and riches, the growing snow between the government and the India Reserve…
In New Delhi and Mumbai’s corridors of power and riches, the growing snow between the government and the India Reserve Bank (RBI), and especially its governor Urjit Patel, has been the subject of much talk since the beginning of this year. During this time not just the two have not seen the eye against many problems; there has been an almost complete division of communication between the government and the central bank.
The insignificant differences have now come to the head with RBI Vice Governor Viral Acharya – which has generally been embedded by Patel – clearly suggests the government’s involvement and emphasizes the need for independence (
TOI had highlighted its remarks in its Saturday edition ).
This has triggered fever speculation about Patel’s fate. Not only does he seem highly unlikely to get an extension beyond the three-year term ending in late September, questions have arisen about his continuation. Patel did not respond to a message from TOI.
Some people in the government have gone so far as saying that “even Raghuram Rajan was better than this” ̵
1; and Patel’s predecessor did not leave the best way.
Only in 2018 there have been at least half a dozen problems that the two have resisted. While the spit started with the government unhappy with RBI in order not to lower interest rates – and even raise them – it turned over in regulation, something that the central bank considers is its exclusive domain.
RBI’s 12th Circular on Non-Rating Classification and Loan Revenue Standards was the next flash point. The government saw it as hard, and it actually drove everything except two state lenders in red.
Around the same time, when the Nirav Modi fraud broke, the government broke out at the RBI under surveillance and drew an almost immediate contradiction with Patel and sought more powers to oversee public banks so that they are in pairs with their private sector equals.
In addition, the government has insisted that RBI enter into giving off to non-bank financing companies (NBFCs), which violates a cash crisis after IL & FS has failed to repay. The central bank has refused to play ball.
What also annoyed the central bank’s brass is the way in which Nachiket Mother was removed from the RBI Board more than two years before his mandate ceased without formally informing him.
On Monday, the RBI Board is scheduled to meet to discuss several issues in what will be the other interactivity in less than a week. Last week’s meeting was stormy by most accounts with newly nominated director and SJM activist S Gurumurthy who was looking for RBI’s efforts to help small businesses while the government’s nominees made a detailed presentation about the need to keep equity standards in line with global standards instead to make them stiffer.
In remarks made on Saturday as seen in response to Acharyas, even though he did not name the RBI, Finance Minister Arun Jaitley said that regulators must have extensive high quality discussion with all stakeholders. “I think that for any regulatory mechanism, consultation with stakeholders must be of very high quality, which probably leads to a revision of traditional thoughts and opinions. Therefore, several regulators now publish their approaches or preliminary proposals, hold hearings, meet individuals, meet groups of stakeholders together and improve what is said. “While the saliva began with interest rates, and the government was also upset for RBI to raise interest rates, it broke into regulation, something that the regulator considers is its exclusive domain.
A separate payment regulator has been another friction point where RBI publicly states why it did not support the move. In fact, it went so far as to release its dissection on a separate regulator on its website.