India Central Bank Head Unexpectedly Resigns In Government Spat

[Swordsmyth]

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.
In a statement on the Reserve Bank of India’s website, Patel said that "on account of personal reasons, I have decided to step down from my current position effective immediately." He stepped down from a position he held since September 2016, when he was selected to replace Raghuram Rajan.


The Oxford-trained Patel, who had tried to stay away from the spotlight, was initially seen playing along with Prime Minister Narendra Modi after he backed a ban on high-value currency notes in November 2016. Since then, he 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.
His exit comes at a time when India, which is closing in on Italy to become home to banks with the worst bad-loan ratio among major economies, is delivering a bitter pill to resuscitate its banking sector.

Earlier this year, the RBI introduced new rules forcing lenders to declare a delinquent borrower even if payments were overdue by a day. That was aimed at easing mounting bad loans, particularly from the power sector. Patel also moved in to ring-fence weak state-run banks. Currently, a total of 12 banks -- 11 in the public sector and one in the private sector-- are under the so-called prompt corrective action framework that places curbs on lending, expanding branch network and dividend distribution.
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 s

India's 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.
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Patel is the second governor of the Reserve Bank of India to depart amid frictions with the government during Modi’s administration; his widely-respected predecessor, Rajan, left after the government refused to extend his tenure, unhappy with his outspokenness on issues that the administration considered beyond his purview.
Patel's resignation was the culmination of long-mounting tensions with Modi’s government which erupted into the public view in October, when Patel’s deputy gave an impassioned speech focusing on the need for central bank independence.
As the Financial Times reports, Patel's decision comes ahead of what was likely to be a tense meeting on Friday, when the RBI’s governing board will be pushing the RBI to make many concessions to governments.
Patel’s departure could clear the way for Modi’s government to appoint a more pliant figure, more amenable to its desire to ramp up the economy ahead of expectations next year, while crushing even the most naive speculation that the central bank of India (or anywhere else for that matter) is independent.

More at: https://www.zerohedge.com/news/2018-...gns-government

[Swordsmyth]

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.

More at: https://www.yahoo.com/news/india-nam...--finance.html

[Swordsmyth]

On Thursday, RBI Gov. Shaktikanta Das during his first meeting at the helm of the bank led a 4-2 vote to cut rates after raising them twice last year.

Das was widely seen bowing to pressures from Prime Minister Nahrendra Modi, who is desperately trying to boost economic growth ahead of a re-election fight later this year. As one analyst at Mizuho Bank pointed out, the move risks reviving inflationary pressures in India after they had largely eased last year. Das was hastily appointed to lead the central bank in December after his predecessor quit following a very public battle over the RBI's autonomy.

“If caught wrong-footed by higher oil, twin deficit worries and global risk aversion, the rupee may have to pay the price for monetary complacency, whether perceived or real,” says Vishnu Varathan, head of economics and strategy at Mizuho Bank Perceptions matter for India’s monetary policy, which is trying to target inflation expectations USD/INR may rise above 72.5 over the next 3-4 months; Mizuho’s view was for a prolonged hold in policy

The RBI cut its repurchase rate 25 basis points to 6.25%, a move that only 11 of 43 economists polled by Bloomberg had anticipated. The rest had expected no change.

The board also voted unanimously to switch the central bank's policy stance to neutral from "calibrated tightening."
Unsurprisingly, the Indian government cheered the cut, with Finance Minister Piyush Goyal tweeting that it would "give a boost to the economy, lead to affordable credit for small businesses, home buyers etc. and further boost employment opportunities," said Indian Finance Minister Piyush Goyal in a post on Twitter.

RBI’s decision to reduce the repo rate by 25 basis point from 6.5% to 6.25% and change of stance to ‘Neutral’ will give a boost to the economy, lead to affordable credit for small businesses, homebuyers etc. and further boost employment opportunities
— Piyush Goyal (@PiyushGoyal) February 7, 2019

Speaking with reporters after the decision, Das said the rate cut would help bolster growth "as long as inflation remains benign." The inflation rate slowed to an 18-month low of 2.2% in December, leaving it well below the central bank's target of 4% (though core inflation, which excludes volatile food and fuel costs, remains closer to 6%).

More at: https://www.zerohedge.com/news/2019-...ected-rate-cut

[Itsback]

50 CBI officers were arrested by police in West Bengal, India when the CBI tried to raid Bengal chief minister "Mamata Banerjee" on Sunday.

[Swordsmyth]

The Reserve Bank of India (RBI) confirmed that Deputy Governor Viral Acharya has stepped down six months before the end of his three-year term, Reuters reported June 23. Acharya submitted his resignation letter several weeks earlier, citing personal reasons. No replacement has been named so far.

Acharya is the second major central bank official to step down since December 2018, fueling concerns over the bank's diminishing political immunity. A known inflation hawk, the deputy governor had repeatedly clashed with Indian Prime Minister Narendra Modi over matters related to monetary policy and the bank's autonomy. With Acharya gone, there's also a greater chance that the bank will again cut interest rates in August, following three consecutive cuts in February, April and June.

More at: https://worldview.stratfor.com/situa...rsonal-reasons