As per an important story that broke down today early morning, "an irreversible breakdown has occurred between RBI governor and the government". And citing similar sources, it has come to light that "RBI governor may even consider resigning. All options on the table".
This has come after an unprecedented attack by Finance Ministry on the functioning of the RBI. The development is amid a tough situation between the central bank and the centre after Viral Acharya, deputy governor of the RBI in a fiery note said that central bank's independence should not be undermined and it could be "potentially catastrophic".
As a hint Acharya's comments point to central bank's push back against government's influence to relax policy measures as well as lessen powers just before general election that are due in May next year. The report by the Reuters suggests that after the fiery comments of Acharya, government officials were very upset. And a reference has been given to problems caused in Argentina when its central government intervened in the bank's affairs over there.
Government official were very upset by Acharya's comments, which included a reference to problems created in Argentina whe centran its government meddled in central bank affairs, Reuters reported.
Acharya's speech comes after a long-running tug of war between the government and the RBI over whether the central bank should part with some of its Rs 3.6 lakh crore ($48.93 billion) reserves to fund the country's fiscal deficit.
From the tone of Acharya's speech, it appeared that the RBI is under tremendous pressure to hand over its surpluses squirrelled away over years and hence its decision to take the issue to the people.
Voicing support for Patel, Bharatiya Janata Party (BJP) leader and Rajya Sabha MP Subramanian Swamy on Wednesday said if the governor decides to leave, the blame would fall on Jaitley.
The government is scouring for funds as it faces a shortfall in expected revenues. On Tuesday, Finance Minister Arun Jaitley blamed the RBI for failing to stop a lending spree between 2008-2014 that left banks with huge bad debts.
This isn't the first time when the central bank governor has faced criticism from the government over policies. Former RBI governor Raghuram Rajan, under pressure from political opponents at home, announced that he would step down after just one three-year term.