India to cool row over central bank's independence
India's government moved to calm tensions with the central bank on Wednesday amid intense speculation that its chief was set to quit over government interference.
The finance ministry said it respected the independence of the Reserve Bank of India (RBI), following media reports that it had sought to influence policy on several occasions.
"The autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Government of India has nurtured and respected this," the ministry said.
Indian business dailies reported that the government had invoked never-before-used powers to send at least three letters to RBI governor Urjit Patel seeking to influence his decision-making.
Some newspapers reported that Patel was preparing to resign over the use of "Section 7" of the RBI Act, which allows the government to instruct the governor on matters of public interest.
In its statement the finance ministry admitted to "consultations" with the RBI but said it wouldn't make them public.
"The government, through these consultations, places its assessment on issues and suggests possible solutions. The government will continue to do so," it added.
The statement followed a strongly worded speech that Deputy Governor Viral Acharya gave on Friday in which he warned that undermining the bank's independence could be "potentially catastrophic".
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