DIFFERENCES BETWEEN RBI, GOVT DATE BACK TO BRITISH ERA

NEW DELHI: The ongoing spat between the government and the Reserve Bank of India (RBI) – it has resulted in speculation that the government may use a neverbefore-used provision of the law to direct the central bank to do something, and also that this could result in the resignation of RBI governor Urjit Patel – isn’t the first time there has been a disagreement between the two, and it probably won’t be the last. Such friction, usually over specific policies goes back a long time.

Be it the first RBI governor under British rule or the second Indian governor in the 1950s, several central bank chiefs have had run-ins with governments of the day, according to experts who have chronicled such episodes.

Last week, RBI deputy governor Viral Acharya warned that attempts to undermine the central bank’s independence could be “potentially catastrophic”, amidst reports that the government is unhappy over a number of issues, including interest rates, how to deploy reserves and the steps to stop the rupee’s slide.

Finance minister Arun Jaitley hit back on Tuesday, saying RBI seemed to have looked the other way when banks gave loans indiscriminately during the previous regime.

The next day his ministry moved to bring things down a notch, reiterating that the government respected the central bank’s independence.

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