No Laughing On Bank Street

In flexing for more autonomy, the RBI runs into the government’s plans as 2019 draws near.

- Lola Nayar

With two deputy governors of Reserve Bank of India (RBI) taking on the govern­ment in a span of less than a week over the need for gre­ater autonomy, some issues of discord between the central bank and the finance ministry have come to the fore. though it is not the first time the two institutions have engaged in or given rise to public discourse, the feud has never been so bitter.

The writing on the wall suggests a hardening of stance by the RBI, and the unwillingness of its governor Urjit Patel and his team to take the blame for all the ills in the banking system. The finance ministry, however, appears to be bent on discrediting the central bank’s stance on various issues. There are several fronts on which the RBI and the finance ministry have taken opposing stances, including not just interest rates, but also the burgeoning non-performing assets (NPAs), with the finance ministry laying the blame on the previous UPA government and, to some extent, the central bank, for allegedly failing in proper regulatory supervision. Another issue is the use of RBI reserves, as the government is keen to get higher dividends for pushing ahead with its various schemes, possibly with an eye on the 2019 general elections.