Market sentiment may take a hit again if Urjit Patel resigns, say analysts

Government officials have recently called for the RBI to relax its lending restrictions on some banks, and the government has also been trying to trim the RBI's regulatory powers.

The ongoing spat between the government and the Reserve Bank of India (RBI), if not contained, will have dire consequences on the markets, feel Dalal Street experts. At this crucial juncture, when markets have started recovering after NBFC turmoil and supportive global cues, the resignation of the RBI Governor Urjit Patel will rattle investor sentiment, they say. 

The rift between the RBI and the government turned ugly after RBI Deputy Governor Viral Acharya last week went public saying undermining a central bank's independence could be "potentially catastrophic. Government officials have recently called for the RBI to relax its lending restrictions