The speech by Reserve Bank of India (RBI) deputy governor Viral Acharya was extremely song and indicative of serious differences between the central bank and the government, said Ananth Narayan, professor, SPJIMR.
If the RBI and the government have huge issues, both will sit across the table and sort them out, Narayan said.
Last week, Acharya said RBI needs to be independent to improve the macroeconomic stability, and policies need to be rule-based.
Read the full text of Acharya’s speech here
“To secure greater financial and macroeconomic stability, these efforts need to be extended to effective independence for the Reserve Bank in its regulatory and supervisory powers over public sector banks,” Acharya said in a speech.
Acharya’s comments come on the back of government efforts to carve out regulatory powers related to payments and create a separate regulator. Government officials have also been calling for the RBI to relax lending restrictions for some banks that have a low capital base.
“This whole issue of reserves which seems to be a key feature of Acahrya’s speech maybe the government is actually eyeing the reserves lying in the RBI balance sheet for the fiscal as well as for pumping up the bank balance sheet at this point in time as a way of recapitalising them,” said Narayan.