Rahuram Rajan defends RBI deputy governor against Modi government's interference

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Congress President Rahul Gandhi on Tuesday urged Reserve Bank of India Governor Urjit Patel to "stand up to" Prime Minister Narendra Modi to "protect the nation". "Protect the nation", he tweeted and also posted the report.

However, an RBI source told Moneycontrol this may not be the case."November 19 is too close [for him to resign] as the tussle between RBI and government is out in the open, it is highly unlikely that he would move out", the source said.

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. Sources have confirmed to The Indian Express that the RBI views this attempt by the government to dip into its reserves can adversely impact macro-economic stability.

However, he said, that the bank should not give more than the profit as dividend accounting to the government, advice which was echoed by accountants, as its role to ensure credit worthiness and printing money has made it "tough to give away dividend", the report added. "If this would fructify, this would be tantamount to the Great Indian Bank Robbery", Tewari claimed.

"So, in order to bridge that fiscal deficit, the government has started eyeing the money which is lying with the RBI". Tewari said the government must learn from Argentina where the transfer of $6.6 billion from the central bank to the treasury sparked off the worst constitutional crisis.

The Finance Ministry has claimed that the existing capital framework of the economic model in RBI is based on a very "conservative" assessment and the amount can be transferred to the central government's account as per the requirement. Argentina is before the International Monetary Fund for a $50-billion bailout, he said.

While Mr Gandhi has accused the government of "destroying" institutions with its alleged strong arm tactics, differences between the government and RBI came out in public domain after a deputy governor raised concerns about the central bank's autonomy.

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