Reserve Bank of India is a political tool


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India’s central bank governor Urjit Patel unexpectedly announced his resignation on Monday following a tense stand-off with Prime Minister Narendra Modi’s government over the bank’s independence.
... Patel ... has waged a war to get India’s struggling banking system in order and punish errant borrowers who have stopped servicing their debt even though they have the ability to pay.
The government wanted the RBI to relax the rules so banks can lend more easily and keep the economic engines firing ahead of a general election next year. But the RBI wants these banks to be slowly nursed back to health. According to the central bank, it needs to be independent so that loan losses of banks aren’t swept under the rug by compromising supervisory and regulatory standards.

That independence came under threat last month, when the government sought greater oversight on the central bank’s functioning and a review of its economic capital framework. Patel has also disagreed with the government’s demand for more share of profits from the RBI’s operations. A transfer of more dividend helps the government meet its budget gap aim.

India's government named an ally of Prime Minister Narendra Modi as the country's new central bank chief Tuesday, a day after his predecessor quit following a dispute about government interference.

Shaktikanta Das has been appointed governor of the Reserve Bank of India (RBI) for three years, a government statement said.

The 63-year-old is a former senior finance ministry official and a key figure in Modi's controversial "demonetisation" scheme of November 2016.

Das has worked with various government bodies and was part of the economic affairs ministry when Modi announced his controversial cash ban that scrapped 86 percent of notes overnight.

"The government has hired an insider who will be sympathetic to government concerns and not hold diverging opinions," independent economist Ashutosh Datar told AFP.

"This is an extremely disappointing choice and is the final straw in chipping away at the RBI's integrity and freedom to set rates and take policy decisions," he added.