Finance Ministry To Shortly Issue A Statement On Government-RBI Rift

The government will soon issue a statement to address the growing differences between the finance ministry and the country's central bank, Economic Affairs Secretary Subhash Chandra Garg today said.

Earlier in the day, television channels reported that Reserve Bank of India Governor Urjit Patel may consider resigning from his post given a breakdown in relations with the government, sparking a sell-off in the rupee and government bonds.

Indian media reports have cited sources are saying that Patel could quit however, the RBI and Finance Ministry have declined to comment on the matter.

The government has invoked never-before-used powers under the RBI Act that allow it to issue directions to the central bank governor on matters of public interest, the Economic Times newspaper reported today.

It said the government had sent letters to the RBI governor in recent weeks exercising powers under section 7 of the RBI Act on issues ranging from liquidity for non-bank finance companies, capital requirements for weak banks and lending to small- and medium-sized companies.

Section 7 says that 'the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest', a statute that has not been used in independent India, according to the Economic Times.

The 10-year benchmark bond yield rose to 7.87 percent from its previous close of 7.83 percent. The rupee fell to 73.99 to the dollar from 73.6750 yesterday, after touching 74.04, its lowest since October 15.