India's central bank dilemma: Here's why RBI's Urjit Patel should hold firm

A resource-strapped government covets the RBI's surplus capital

An institution with money-printing powers should have no difficulty keeping the lights on. But could it continue to act effectively after depleting its net worth?

Former Bank of England policymaker Willem Buiter posed that question in early 2008, and it’s currently the biggest challenge facing his long-time research collaborator Urjit Patel, the Reserve Bank of India governor. 

Under pressure to return surplus capital to a resource-strapped government, Patel should borrow an idea from Buiter’s paper to argue that very little of the central bank’s assets and liabilities are actually visible. For New Delhi to covet what’s in sight of the accountants would