Under Siege?
Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets." This warning by Reserve Bank of India (RBI) Deputy Governor Viral Acharya in October last year seems to have gone unheeded. Acharya is the latest key RBI official to have quit (six months before his term was to end) in the middle of tumultuous events at the RBI that have, over the past year, seen the government demand additional surplus capital, threatening to use its special powers to direct the RBI on matters such as restructuring MSME loans, releasing weak banks from tight regulatory control and Urjit Patel resigning as governor in haste citing personal reasons.
That's not all. The siege in recent months has included a bank dragging the RBI to court over stake reduction guidelines and a quasi judicial body like the National Company Law Appellate Tribunal (NCLAT) encroaching into its powers, saying banks should not declare the IL&FS account as a non performing asset (NPA), and the biggest of all, the Supreme Court setting aside the RBI circular that laid down rules for one day default by big companies and, in a separate case, asking it to disclose information about its annual inspection of banks under the Right to Information (RTI) Act.
Even as the challenges continue, the RBI, under the new Governor, Shaktikanta Das,
