RBI Governor Urijit Patel should work in sync with the government or otherwise he can resign, the RSS-affiliated Swadeshi Jagran Manch said Wednesday.
The comments come against the backdrop of escalating tension between the government and the RBI over various issues.
“The Reserve Bank of India Governor should work in sync with the government or otherwise resign,” Swadeshi Jagran Manch’s (SJM) co-convener Ashwani Mahajan told PTI.
He also said that Deputy Governors, as well as RBI office bearers, should restrain from speaking in the public about any disagreements with the government.
If there is any disagreement with the government, then it should be expressed at the bank’s board meeting and not publicly, Mahajan said.
He was referring to RBI Deputy Governor Viral Acharya’s hard-hitting speech on Friday in which he had warned that undermining central bank’s independence could be “potentially catastrophic”, a possible indication of the RBI being pushed to relax its policies ahead of general elections next year.
“This entire talk of central bank’s independence is a western concept. It is not acceptable and feasible here. India is a developing country our main priority is employment and growth of small-scale industries. RBI should stand with the government on these issues,” Mahajan said.
The RBI’s main role is about monetary policy, which deals with stability of the economy and not its growth, he said and claimed that the RBI does not have the expertise of fiscal management.
SJM’s senior leader S Gurumurthy is a member of the RBI board.
Earlier on Wednesday, the Finance Ministry said the RBI’s autonomy is “essential” and will be “nurtured”, as it sought to calm investors worried by the central bank reportedly being forced to resolve differences with the Centre which has cited powers never used before.
The government also confirmed that “extensive consultations” on several issues take place between the government and the Reserve Bank of India (RBI) from time to time in “public interest”.
The government has never made public the subject matter of the consultations. Only final decisions are communicated, the Finance Ministry said.
The rift between the government and the RBI surfaced after Deputy Governor Viral Acharya in a hard-hitting speech on Friday pitched for “effective independence” of the central bank.
Acharya had said governments that do not respect central bank’s independence would sooner or later incur the “wrath of financial markets, ignite an economic fire and come to rue the day they undermined an important regulatory institution”.
Acharya emphasised that undermining a central bank’s independence is akin to committing a “self-goal” for any government.
There have been reports circulating that the government has invoked never-before-used powers under Section 7 of the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.
Separate letters have been sent to the Reserve Bank of India (RBI) governor in recent weeks, exercising powers on issues ranging from liquidity for non-banking financial companies, the capital requirement for weak banks and lending to small and medium enterprises, a report said.
(With PTI inputs)