It’s not easy being the governor of the Reserve Bank of India. Two years ago, the former finance minister was so fed up with his advice not being taken by the independent central banker that he threatened to “walk alone” down the path to growth. On Monday, at his big speech to the Indian community in Sydney, Prime Minister Narendra Modi went a step further.

“I started the Pradhan Mantri Jan Dhan Yojana. Around 75 million families will benefit from this. So I spoke to the RBI and asked them. They said, ‘Modiji ho to sakta hai, lekin… (it can be done, but…)’” he said. “But then, who dares to say no to a Prime Minister?”

Modi’s story concluded with him managing to prevail on the RBI to push forward with the Jan Dhan Yojana and, eventually, open 71 million accounts within 10 weeks. Hidden behind this figure is a more troublesome reality: up to 75% of these new accounts have no money in them, a potential problem the RBI governor, Raghuram Rajan, had flagged soon after Modi announced the scheme.

BRICS bank

Yet despite this apparent willingness to give instructions to a body that is ostensibly independent, the same day saw news reports suggest how highly the Modi government values Rajan. Following discussions with the rest of the BRICS leaders in Brisbane, the question of who would head the new development bank came up.

When the bank had been mooted by the group, as an alternative to the International Monetary Fund and the World Bank, it was decided that it would be placed in Beijing while giving India first choice of who gets to run it. Rajan, with his IMF pedigree and international acceptability, would be a natural choice.

On the same day as Modi's Sydney speech though news reports, attributed to anonymous sources, made it seem as if the government has decided against this. The Hindu brief, also without named sources, added some details.

“It is a question of the confidence the global world of finance has come to have in Dr. Rajan as India’s central banker," the source said. "There is always the risk that his departure from the Reserve Bank could bring the rupee under pressure with overnight dollar outflows."

Premature questions

This is a long way removed from the sort of noises that were coming out of the Bharatiya Janata Party before Modi came to power. BJP leader Subramanian Swamy can often be a loose cannon, but that means the party also uses him as an attack dog to make the statements they wouldn't otherwise want attached to their name.

In May, Swamy made it seem as if he was certain that Rajan would be sacked the minute Modi came to power. And he wasn't the only one. Plenty was murmured about how Rajan, who was appointed by the previous government, would have to go.

But unlike the outgoing Congress, Rajan had one base that the BJP wanted to court: the international business community. His widespread acceptance with this all-important audience insulated him from the fate that befell many other UPA appointees.

Rate cuts

That doesn't mean all is swell between the government and the central bank. Aside from Modi's belligerence, Rajan is also facing the same pressure that his predecessor shrugged off well enough for Chidambaram to make his "walk alone" statement.

"Currently, interest rates are a disincentive," Jaitley said a few weeks ago. "Now that inflation seems to be stabilising somewhat, the time seems to have come to moderate the interest rates."

September's positive numbers, on the inflation front, and some promising, if spotty, news on industrial growth has renewed the call for interest rates to be cut. But Rajan has been certain all along that he wants to see promises of structural change and a genuine trend towards lower inflation before he will consider a rate cut.

The next review is due up in December. With industry clamouring for cheaper credit and Modi saying he can dictate terms to the central bank, will Rajan be able to stick to the line he's maintained all along?