$ 75bn currency swap pact signed

New Delhi/ Tokyo: India and Japan on Monday concluded one of the largest bilateral currency swap agreements at $ 75 billion that will help in bringing greater stability in foreign exchange and capital markets in the country. This facility will enable the agreed amount of foreign capital being available to India for use as and when need arises.

New Delhi, Oct. 29: Indian government officials are very upset with the Reserve Bank of India ( RBI) for publicly talking about a rift with the government, fearing it could tarnish the country’s image among investors, senior officials said on Monday.

On Friday night, RBI’s Viral Acharya warned that undermining a central bank’s independence could be “potentially catastrophic”, in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers.

In a speech to top industrialists Mr Acharya cited the Argentine government’s meddling in its central bank’s affairs in 2010 as an example of what can go wrong. That led to a surge in bond yields that badly hurt the South American economy.

“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,” Mr Acharya said.

The government officials Reuters spoke to on Monday declined to be identified because of the sensitivity of the subject.

One said that it was vital that what happened between the government in New Delhi and the RBI in Mumbai was kept confidential. “The government respects the autonomy and independence of the RBI but they must understand their responsibility,” the official said.

A second official, based in Prime Minister Narendra Modi’s office, said it was “very unfortunate” that the RBI took the matters public. “The government is very upset. It was not expected from the RBI,” the official added.

An RBI spokesman was not immediately available for comments after business hours.