India government says RBI has autonomy as markets wobble
STATEMENT HELPS BSE SENSEX RECOVER FROM EARLY LOSSES TO CLOSE 551 POINTS UP
India’s government stressed yesterday that the autonomy of the Reserve Bank of India (RBI) is “essential” as it sought to calm investors worried about a growing public quarrel with the central bank.
Indian stocks and bonds fell and the rupee weakened earlier in the day amid reports that RBI Governor Urjit Patel may consider resigning given the breakdown in relations. The BSE Sensex later recovered to post a 551 point gain.
The media reports also said the government had invoked never-before-used powers to issue directions to the central bank governor on matters of public interest.
In a statement issued hours later through the finance ministry, the government said the RBI’s independence was “an essential and accepted governance requirement”.
The government added that it would continue to carry out extensive consultations with the central bank to give its assessments on issues and suggest possible solutions.
But it was unclear if it had used powers for the first time under the RBI Act to give the bank instructions. The Economic Times reported the government had sent letters to Patel in recent weeks exercising those powers.
Indian television channels CNBC-TV 18 and ET Now both reported earlier in the day that Patel might resign.
Indian markets clawed back some early losses after the statement but still appeared tentative. Benchmark stock indexes BSE and NSE rose more than 1 per cent, while the rupee was at 73.95 to the dollar.