Deputy Governor Viral Acharya's speech last Friday on central bank independence brought the rift between the government and the RBI glaringly out into the open. The RBI appears to have forced the government to back off, at least for now, with the Finance Ministry finally saying that it respects the RBI's autonomy as it sought to calm jittery investor nerves.
The RBI's top leadership has made it evident that it will stand its ground on the three issues it has specifically mentioned - the state-run banks, the use of its reserves and its regulatory scope. But Governor Patel's days as the RBI chief seem to be numbered.
Governor Patel resigned on 10 December 2018. Investors remain wary of the government's attempts to influence RBI policy and their independence remains at risk.