RBI vs government: Officials unhappy with RBI's decision to go public

Indian government officials are very upset with the central bank for publicly talking about a rift with the government, fearing it could tarnish the country's image among investors, senior officials said on Monday.

On Friday night, Reserve Bank of India (RBI) Deputy Governor Viral Acharya warned that undermining a central bank's independence could be "potentially catastrophic", in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers.

One government official said that it was vital that what happened between the government in New Delhi and the RBI in Mumbai was kept confidential.

"The government respects the autonomy and independence of the RBI but they must understand their responsibility," the official said.

A second official, based in Prime Minister Narendra Modi's office, said it was "very unfortunate" that the RBI had made the matters public. "The government is very upset. It was not expected from the RBI," the official added.