The rift between the Central Bank and the Ministry has gone international, with the International Monetary Fund expressing its concerns.
On Thursday, the IMF's Director for Communcations Gerry Rice said "We’re monitoring the development on that issue and will continue to do so," referring to the rift between the RBI and the Centre.
The agency also said that it was against opposition of the independence of any central bank. "International best practice is that there should be no government or industry interference that compromises the independence of the central bank and financial supervisor,” Rice added.
The week saw communication between the Reserve Bank and the ministry stale with veiled barbs coming from both sides. While Deputy Governor Viral Acharya hinted of regulatory interference in his speech, the Finance Minister blamed the Reserve Bank for the rise in NPAs after an FSDC (Financial Stability and Development Council) meeting that was held on Tuesday.
RBI Deputy Governor Viral Acharya in a scathing speech last Friday said that undermining central bank’s independence could be “potentially catastrophic”, possible indication of the RBI being pushed to relax its policies ahead of general elections next year.
Besides the speeches, sources and media reports have said that the Central Bank was in receipt of at least three letters from the Government on different issues under Section 7 of the RBI Act. The Act which is yet to be invoked in recent times offers the government additional powers to issue directions to the central bank governor on matters of public interest.
On Wednesday soon after reports speculated of the Governor contemplating a resignation, the Finance Ministry in a statement said that it batted for the “autonomy of the central bank, within the framework of the RBI Act".
It also added that autonomy was an "essential and accepted governance requirement. Governments in India have nurtured and respected this."
The Governor has called a board meeting comprising of its members including the government nominee directors on November 19.