* RBI governor considering withdrawal – TV
* Government calls rare authority to issue RBI instructions – Report
* Bonds, rupee weakens after governor withdrawal reports (updates with rupee, falling bonds, quotes, Details)
By Suvashree Choudhury and Tanvi Mehta
MUMBAI / BENGALURU, October 31 (Reuters) – Governor of the Reserve Bank of India, Urjit Patel, might consider resigning from his post. trigger a sell-off in rupee and bonds.
CNBC-TV18 and ET Now quoted sources saying Patel could stop.
The RBI and the Ministry of Finance declined to comment.
Under the RBI Act, the government has exercised unprecedented powers to issue instructions to the central bank governor on matters of public interest, the Economic Times reported.
In recent weeks, the government has sent letters to the RBI governor exercising the powers under Section 7 of the RBI Law on matters relating to liquidity for non-bank financial firms, capital requirements for weak banks and loans Small and medium-sized enterprises are big enough for big companies.
Section 7 states: "The Central Government may, from time to time, give the Bank such instructions as it deems necessary in the public interest after consultation with the Governor of the Bank", a statute which has not been applied in the Independent India, according to the Economic Times.
The rupee fell from 73.6750 on Tuesday to $ 73.99 against the dollar, after reaching 74.04, its lowest level since October 15.
"It's hard to believe that the RBI governor will step down because he's unprecedented and irresponsible and (immature) a step," said a senior trader at a foreign bank. "However, it is quite worrying when the government is trying to intervene continuously in RBI operations."
IN THE OPEN
Tensions between the RBI and the government have emerged after Vice Governor Viral Acharya undermined this last week. Central Bank independence could be "potentially catastrophic," suggesting that The government is stepping back against government pressure to ease its policy and reduce its powers ahead of the upcoming parliamentary elections in May.
Finance Minister Arun Jaitley blamed the central bank for not blocking credit in 2008-2014, leaving banks with $ 150 billion in bad debt losses.
Patel and other regulators, including the Securities and Exchange Board of India, the Insurance Regulatory and Development Agency and the Pension Fund Regulatory and Development Agency, met with Jaitley and other leading ministries of finance at a meeting of the Financial Stability and Development Council on Tuesday to discuss the liquidity crisis.
However, there was no sign of Patel's resignation at the meeting, officials said.
Patel and his deputy governors are expected to meet on Friday with senior officials from the Treasury. (Additional coverage by Manoj Kumar in New Delhi, editors of Gopakumar Warrier and Neil Fullick)