Central bank's independence is essential: India, Latest Business News - The New Paper

Central bank's independence is essential: India

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NEW DELHI/MUMBAI : India's government affirmed its belief in central bank autonomy yesterday, calling it "essential" in a bid to calm investors worried by a public row with the Reserve Bank of India (RBI).

Indian stocks and bonds fell and the rupee weakened earlier in the day amid reports that RBI governor Urjit Patel may consider resigning given the breakdown in relations.

The media reports also said the government had invoked never-before-used powers to issue directions to the central bank governor on matters "of public interest", related to support for the financial sector and small companies.

In a statement issued hours later through the Finance Ministry, the government said RBI's independence was "an essential and accepted governance requirement".

The government added that it would continue to carry out extensive consultations with the central bank to give its assessments on issues and suggest possible solutions.

But it was unclear if it had used powers for the first time under the RBI Act to give the bank instructions. The Economic Times newspaper reported the government had sent letters to Mr Patel in recent weeks exercising those powers.

TV channels CNBC-TV18 and ET Now both ran reports earlier citing unnamed sources saying Mr Patel may resign. The RBI declined to comment. - REUTERS