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* The governor of the RBI may consider resigning – Television
* Government invokes rare power to instruct RBI – report
* Bonds, rupee falter after governor's resignation reports (updates with rupee, declining bonds, quotes, details)
By Suvashree Choudhury and Tanvi Mehta
MUMBAI / BENGALURU, Oct. 31 (Reuters) – Reserve Bank of India governor Urjit Patel may consider resigning from his post due to a breakdown in relations with the government, reported Wednesday television channels, causing a massive sale of the rupee and bonds.
Indian television channels CNBC-TV18 and ET Now cited sources that Patel may resign.
The RBI and the Ministry of Finance declined to comment.
The government has invoked powers never before used under the RBI law, which allow it to issue instructions to the governor of the central bank on matters of public interest, the Economic Times reported.
He added that the government had sent letters to the governor of the RBI in recent weeks, exercising powers under Article 7 of the RBI Act and dealing with issues ranging from liquidity to finance companies non-bank, capital requirements for distressed banks and loans to small and medium-sized enterprises. .
Section 7 stipulates that "the Central Government may, from time to time, issue to the Bank such instructions as it deems useful, after consultation with the Governor of the Bank, in the public interest", a law which has not been applied in independent India. , according to the Economic Times.
The yield on 10-year benchmark bonds was 7.87%, compared to 7.83% previously.
The rupee fell to 73.99 for a dollar from 73.6350 Tuesday, after touching 74.04, its lowest level since Oct. 15.
"It's hard to believe that the governor of the RBI will resign because this decision is unprecedented and would seem pretty irresponsible and (a) not immature," said a senior trader at a foreign bank. "But it is quite disturbing to see the government trying to interfere continuously in the operations of the RBI."
OPEN
Tensions between the RBI and the government have escalated after Vice Governor Viral Acharya said last week that undermining the central bank's independence could be "potentially catastrophic," indicating that the authority is pushing back government pressure to soften its policies and reduce its powers to a general election scheduled for May.
In addition, Finance Minister Arun Jaitley blamed the central bank for not stopping a wave of lending in 2008-2014 that left banks with $ 150 billion in bad debt.
Patel and other regulators, including the Securities and Exchange Board of India, the Regulatory Authority and Development Insurance and the Regulatory Authority and Pension Fund Development , met with Jaitley and other senior finance ministry officials at a meeting of the Stability and Financial Development Council on Tuesday to discuss the liquidity crisis.
However, Patel showed no sign of resignation at the meeting, officials said.
Patel and his deputy governors are expected to meet with senior Finance officials on Friday. (Additional report by Manoj Kumar in New Delhi, edited by Gopakumar Warrier and Neil Fullick)
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