It, however, underlined that both the government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy.
Representatives at the Reserve Bank weren't immediately available for comment. "Governments in India have nurtured and respected this", the government statement said. Reserve Bank case emphasising that "the Reserve Bank, apart from it being a reasonable body, is answerable to the Central Government, and the public opinion is certainly strong and vocal enough for it to heed". For instance, a senior government official maintained that the provision only relates to the management of the central bank and the central government may not be empowered to issue directions to the RBI on policy-related matters.
The counsel representing RBI had said that Section 7 of the RBI Act "embodies and puts in place a forum for resolution of all questions and is in one sense the repository mechanism for dealing with issues which constitute a "conflict zone".
Finance Minister Arun Jaitley and Reserve Bank of India Governor Urjit Patel on Tuesday met face-to-face - at the Financial Stability and Development Council (FSDC) meeting - for the first time after the tension between the government and the central bank became public. But at the same time, there is an unmistakable sense of displeasure and warning from the government when it says that it frequently consults with RBI on important matters but never goes public with these matters.More news: 'Contrite' banned Australia trio should be free to play - ACA
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"The autonomy of the Central Bank, within the framework of the RBI Act, is an essential and accepted governance requirement". "Even the RBI board is being sought to be stuffed in a particular direction, which would prompt the discerning people to look askance and make it hard for RBI to frame policies", the union said in the letter.
BJP slammed Rahul Gandhi for his criticism against Prime Minister Narendra Modi over the RBI-Centre rift, and said that it reflects Congress party's grounding, "which is fast eroding in national politics". The central bank has received letters from the government seeking Governor Urjit Patel's views on issues including its handling of weak state-run lenders, tight liquidity in the market, and resolving bad loans at power generators, the people said, asking not to be identified because they aren't authorized to talk to the media.
Voicing support for Patel, Bharatiya Janata Party (BJP) leader and Rajya Sabha MP Subramanian Swamy on Wednesday said if the governor decides to leave, the blame would fall on Jaitley.