India's central bank meddling could undermine financial stability: S&P Global

The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui

LONDON (Reuters) - The increasing involvement of the Indian government in the affairs of the country’s central bank is a negative for the ratings of giant Asian economy’s banking system, S&P Global said on Monday.

“S&P Global Ratings views as credit negative the circumstances leading to the recent resignation of Urjit Patel, governor of the Reserve Bank of India (RBI),” S&P analysts Michael Puli and Andrew Wood said in a note.

“Sustained and intense external pressure from the Indian government risks eroding these (central bank independence and prudent policy) settings over time, and could also undermine the long-term financial stability in the country.”

S&P’s lead global sovereign analyst said last week that India’s 7 percent annual growth would be enough to keep the Indian government’s investment grade BBB- rating stable.

Reporting by Marc Jones; editing by Helen Reid