Indian currency slips on rumors about governor of RBI about to exit

The Indian currency lost ground on Wednesday because of rumors that Urjit Patel, governor of the Reserve Bank of India, was about to resign after a tense confrontation with the government of Prime Minister Narendra Modi.

Speculation comes a few days after Viral Acharya, Patel's MP, delivered a powerful public lecture warning of the "potentially catastrophic" consequences of intensifying government efforts to influence policy. central banks.

The Indian Finance Ministry – furious after Acharya's speech – issued a statement on Wednesday saying that the central bank's autonomy was "an essential and accepted requirement of governance".

However, he indicated that the government was entitled to conduct "in-depth consultations" with the regulator, "by which it places its assessment on the problems and suggests possible solutions". He added that "the government will continue to do so".

Divergences between the RBI and Modi's government have increased on a number of sensitive issues, including the administration's pressure to access some of what it sees as the RBI's "surplus" reserves for support public finances.

The government also expressed anger at the RBI's refusal to dilute its restrictions on the growth of underperforming banks and its management of the liquidity shortage that followed the recent failure of the infrastructure financier IL & FS.

The rupee was down 0.4 percent to 73.95 rupees against the dollar, after falling earlier to 74.13 rupees.