by Harish Gupta, National Editor, Lokmat Group
Tension mounts between RBI & Govt.
Hasmukh Adhia as RBI Governor ?
Harish Gupta
New Delhi, Nov. 8
As the tensions between the central bank and the Modi government refusing to ease, there is considerable speculation that the South Block is ready with a contigency plan in the event of RBI governor Urjit Patel putting in his papers.
Though RBI Governor Urjit Patel is on record to say that all issues will be discussed at the RBI board's meet in Mumbai on November 19, controversies refusing to die. Ut got a fillip when a leading newspaper reported that the Finance Ministry wants the RBI to part with over Rs 3 lakh crores in dividend. This is a record any government has sought from the RBI and has added fuel to the fire. The government and the RBI have not denied the report. Normally, the RBI has been giving dividend to the government to the tune of Rs 25000-30000 crores every year. But the Finance Ministry wants this amount to recapitalize the public sector banks who are facing a huge cash crunch. The government has already come out with a plan to fund these bank with Rs two lakh crores. But it is facing acute cash shortage due to surge in demand from the NFBCs, infrastructure sector and bank recapitalization.
Urjit Patel has maintained a studied silence despite provocative statements being made by some non-official and part-time members of the RBI Board. But Urjit Patel has sent a clear signal that he is a tough guy and unlikely to relent when comes to the independence of the RBI. The prospects of Patel resigning had receded as some sort of truce has been achieved. But after non-official member S Gurumurthy blasted the RBI and Economic Affairs Secretary Subhash garg attacked Viral Acharya, RBI Deputy governor, the war may escalate further. Garg attacked Acharya and mocked him asking him where is “Wrath of the Markets?”. Acharya had said if the government interfere, it will have to bear the wrath of the markets. The government is demanding that RBI relax norms for loans to power sector and relaxing norms for SMEs. Urjit Patel was in no mood to do so. The board of RBI was unwilling to relent also.
Highly placed sources say that the government is fed up with professionals who are not aware of the ground realities of the economy; be it Raghuram Rajen or Urjit Patel. It will now have bureaucrats as next RBI governor. It is in this regard that the name of Hasmukh Adhia is being mentioned.
He is retiring on November 26 this year. At one point, he was tipped to be cabinet secretary. But Modi decided to give extension to incumbent P K Sinha for a year. Adhia is from the Gujarat cadre and said to be one of Modi’s handpicked and trusted officials. Many in the bureaucracy believe that the government would like to retain his services in an important capacity after he retires. In the event of Urjit Patel choosing to stay put, Adhia may also be given an extension until the next General Election.
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