India’s currency lost the ground on Wednesday among rumors on the markets that Urjit Patel, India’s governor of India, was on the verge of resigned after a tense shutdown with Prime Minister Narendra Modis government.
Speculation comes days after Patel’s deputy, Viral Acharya, issued a hard striking public lecture warning of the “potentially disastrous” consequences of the government’s intensifying efforts to influence central bank policy.
India’s finance ministry – said to be furious with Mr Acharia’s speech – issued a statement on Wednesday saying that central bank independence was “an important and accepted governance requirement”.
However, it is said that the government had the right to hold “extensive consultation” with the supervisory authority “, which puts its assessment on problems and suggests possible solutions.” It added that “the government will continue to do that.”
The differences between RBI and Mr Modi’s government have arisen on a number of sensitive issues, especially the administration’s efforts to access some of what it considers RBI’s “redundant” reserves to break public finances.
The government has also expressed anger at RBI’s refusal to dilute its restrictions on the growth of poorly functioning banks and its management of the liquidity shortage that has followed the recent IL & FS infrastructure financing debt.
The rupee was 0.4 percent at Rs73.95 against the dollar, after falling to Rs74.13.