The government is believed to be unhappy with the RBI over a number of issues including interest rates, how to deploy reserves and how to respond to India’s sliding rupee.
The rupee has been one of Asia’s worst-performing currencies in 2018, while economic growth in the past quarter slowed to under 8%.
It is understood the government is putting pressure on the bank to enact policies to help spur growth ahead of 2019’s elections, when Modi will run for a second term. The government would like the RBI to lower interest rates and free up more of its cash reserves to invest in Asia’s third-largest economy, analysts say.
Finance minister Arun Jaitley hit out at the RBI earlier in 2018 over a massive multibillion-dollar loan crisis that is hampering India’s corporate sector.
Jaitley accused the RBI of failing to stop indiscriminate lending from 2008 to 2014, saying it had “looked the other way” while banks issued loans that turned sour.
The rift flared up again when economic hardliners from a Hindu nationalist group linked to Modi’s ruling Bharatiya Janata Party (BJP) told Patel to fall in line with the government or quit.
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