Arun Jaitley will chair a meeting of the Financial Stability and Development Council
New Delhi: Finance Minister Arun Jaitley and RBI governor Urjit Patel are set to be face-to-face today in a meeting of a financial stability body amid tension between them after Mr Patel's deputy made a strong call for autonomy for the central bank. News agency Reuters has quoted sources in Prime Minister Narendra Modi's Office to report that government officials are upset with the RBI for exposing a rift by going public with its criticism. Here is the 10-point cheat sheet:
- Arun Jaitley will chair a meeting of the Financial Stability and Development Council that Urjit Patel is scheduled to attend as chief of the RBI or Reserve Bank of India.
- The rift between the government and the RBI surfaced after the central bank's deputy governor Viral Acharya's candid speech on Friday warning that undermining the RBI's independence could be "potentially catastrophic".
- The Finance Minister in turn criticized RBI and accused it of failing to prevent bad loans. "The central bank looked the other way when banks gave loans indiscriminately during 2008 to 2014," Mr Jaitley said on Tuesday.
- Reuters reported that its sources in the PM's office feared the rift could tarnish the country's image among investors.
- Former Finance Minister P Chidambaram urged the government and the Reserve Bank of India to work behind closed doors to iron out their differences. "I think the matter is serious enough and it will be best if the RBI and the government don't talk across each other through lectures — we have had two already," the Congress leader told reporters.
- The financial stability committee meets as the government tackles the aftermath of the IL&FS crisis, in which the shadow lender defaulted on its debt payments. The crisis has provoked fear of contagion with a longer shadow on Asia's third-largest economy.
- Deputy RBI governor Viral Acharya's speech had called for greater powers for the central bank to regulate state-run lenders."Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution," he had said.
- Mr Acharya had three of his fellow deputy governors in the audience and also thanked Governor Patel for his "suggestion to explore this theme for a speech", in a show of unity from an institution typically known for its restraint.
- Government officials have recently called for the RBI to relax its lending restrictions on some banks. New Delhi has also been trying to trim the RBI's regulatory powers by setting up a new regulator for the country's payments system.
- The Modi government has also been pushing RBI to part with some of its Rs 3.6 trillion surplus to help bridge the fiscal deficit and finance its welfare programmes.