The friction between the North Block and the banking regulator came under public glare when for the first time, the RBI published a dissent note on its website, expressing its disagreement with the government in setting up a separate payments regulator.
After the tussle within CBI, it's now RBI versus the Modi government, that is making headlines. The friction between the North Block and the banking regulator came under public glare when for the first time, the RBI published a dissent note on its website, expressing its disagreement with the government in setting up a separate payments regulator.
It further widened last week after RBI's deputy governor Viral Acharya had made a strong case for the need of autonomy at the country's central bank -- his speech had been widely shared on social media. Citing sources, Reuters reported that the government officials are very upset with the RBI for making the rift public.
According to Reuters' report, Modi government thinks that Acharya's comments could dent India's image among investors.
What did Viral Acharya say?
RBI deputy governor Viral Acharya, pressing for independence of the central bank, said that lack of autonomy prevents it from regulating public sector lenders, the Times of India reported.
"A government's decision-making is rendered short, like the duration of a T20 match. In contrast, the RBI plays a Test match... trying to win seach session," he said.
Earlier, pitching for "effective independence", RBI Deputy Governor Viral Acharya on Friday said governments that do not respect central bank's independence would sooner or later incur the wrath of financial markets.
Amid instances of apparent differences between the government and the RBI, Acharya emphasised that undermining a central bank's independence is akin to committing a "self goal" for any government.
You can read about more of his comments here.
What happened next?
After RBI deputy governor Viral Acharya fired the first salvo, the central bank's employees union on Monday launched an attack against the central government.
In a press statement, All India Reserve Bank's Employees Association (AIRBEA) said that "undermining the country's central bank is a recipe for disaster and the government must desist."
Backing the deputy governor, AIRBEA said that "Acharya had spoken more in disgust and despondency due to continuous nibbling by the government and the ministry of finance".
What is opposition's take?
The power tussle has also taken a political colour with the Congress siding with RBI.
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