The Reserve Bank of India governor Urjit Patel is considering all options including resigning from his post following an unprecedented attack on the central bank’s functioning by Finance Minister Arun Jaitley.
"RBI governor may even consider resigning. All options on the table," multiple sources familiar with the matter told CNBC-TV18 on Wednesday.
There is an "irreversible breakdown between RBI governor and the government," one of the sources added.
The government on Wednesday issued a statement clarifying its stance on the central bank autonomy.
"Autonomy of RBI within the framework of RBI Act is essential," the statement read.
"Extensive consultations on many issues take place between government and RBI frequently ... suggest solutions post consultations with RBI".
CNBC-TV18 has reached out to the RBI and its comments are awaited.
The development comes amid a growing rift between the centre and the central bank after
RBI deputy governor Viral Acharya, in a fiery speech, warned that undermining a central bank's independence could be "potentially catastrophic".
Acharya's comments gave an indication that the central bank is pushing back hard against government pressure to relax its policies and reduce its powers ahead of a general election due by next May.
Government official were very upset by Acharya's comments, which included a reference to problems created in Argentina when 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.
Also Read: Government yet to invoke section 7 of RBI Act RBI vs Government: Here's what Section 7 of the RBI Act states Tug-of-war: Here's what caused rift between RBI and govt RBI vs Govt: As Urjit Patel may consider exit, here's a look at his career as banker and economist
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