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In an indication that he is ready to resolve the recent differences between the government and the central bank, Governor Urjit Patel has called a meeting of the central bank’s board on November 19.
The stand-off between the government and the RBI started with some non-official directors reportedly pressing for relaxation in the prompt correction action framework for weak banks, increased flow of credit to micro, small and medium enterprise sectors, and a special liquidity window for non-banking finance companies at the RBI’s last board meeting.
The RBI brass did not take this demand kindly with Viral Acharya, Deputy Governor, cautioning that “governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.”
The stand-off between the government and the RBI got exacerbated as there were reports that the former will invoke powers under RBI Act to issue directions to the latter on matters of public interest.
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