Government To Continue Pressing RBI For Relaxing Norms, Funds

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In his interview with the news channel, the former Governor described RBI as a "seat belt", which would save the "driver" - the government - if an accident occurs. According to recent reports, Patel had threatened to resign following serious differences with the central government. Sources cited by the website pointed out the RBI governor is "not only exhausted of the fight with the government, but it has also been impacting his health in a big way".

"We will do everything to protect the interests of the economy", one of the members of the RBI central board told Reuters, noting the governor and his team would have to "explain, defend and justify" their decisions at the board meeting.

The government wants the RBI to part with most of its profit as dividend. "Protect the nation", he tweeted and also posted the report.

However, the government is of the view that the RBI has over-estimated its capital reserves requirements resulting in an excess capital of Rs 3.6 lakh crore.

It has also mandated banks to declare a delinquent borrower even if payments were overdue by a day.

Sources had said that the RBI's board meeting on November 19 was pre-scheduled and routine.

The rift between the RBI and the Modi government turned ugly after Patel's deputy, Viral Acharya, said last week that attempts to undermine the central bank's autonomy could prove to be 'potentially catastrophic'.

Apart from Patel and his four deputies, there are 13 nominated directors on the RBI's board.

"I think certainly it would be best if both sides respected each other's motivation and thoughts. the RBI after listening to the government has provided the best professional answer. and historically it has done that", he said.

"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; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of worldwide investors, and longer life spans", Acharya had said.

It is unclear, though, how the government will seek to exert pressure through the RBI's Central Board as the body is a largely symbolic one, which has never had a direct say in the bank's directives and policies, according to two additional sources with knowledge of the law under which the central bank operates.

Two of the contentious issues behind the ongoing spat between the government and the central bank which of late has reached historic lows, has been North Block's call for addressing the liquidity crunch.

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