In a major development, the Reserve Bank of India and the Central government are moving towards ironing out their policy differences ahead of the RBI’s crucial board meeting on November 19, sources said.

The government and the RBI are seeking to defuse the worsening tensions that had threatened the investors.

Although the conflict still persists, sources also said that it was unlikely that RBI Governor Urjit Patel will submit his resignation at the board meeting.

Earlier media reports claimed that RBI Governor Urjit Patel could resign at the central bank’s next board meeting on November 19.

Urjit Patel is believed to have met Prime Minister Narendra Modi last week in a bid to work out a solution on the contentious issues.

Sources said Patel was in the national capital on Friday and met senior officials in the Prime Minister’s Office (PMO).

The meetings, which some said also included with the Prime Minister, came amid a face-off between the central bank and the finance ministry over issues ranging from the appropriate size of reserves that RBI must maintain to ease of lending norms to step up growth in an election year.

Sources said there are indications that the RBI may create a special dispensation for lending to small and medium enterprises, but it was not immediately clear if an agreement has been worked out to ease liquidity situation for non-banking finance companies (NBFCs) and the RBI parting with its substantial part of its surplus.

PM Modi had appointed Patel as the RBI governor in 2016 for a three-year term that ends in September next year.

Reports earlier said that the government had invoked never-before-used powers under Section 7 of the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.

Read | Govt confirms ‘extensive consultations’ with RBI amid reports of invoking special powers

Separate letters have been sent to the Reserve Bank of India (RBI) governor in recent weeks, exercising powers on issues ranging from liquidity for non-banking financial companies, the capital requirement for weak banks and lending to small and medium enterprises, the report said.

The rift between the government and the RBI surfaced after Deputy Governor Viral Acharya in a hard-hitting speech pitched for “effective independence” of the central bank.

Acharya had said governments that do not respect central bank’s independence would sooner or later incur the “wrath of financial markets, ignite an economic fire and come to rue the day they undermined an important regulatory institution”.

Acharya emphasised that undermining a central bank’s independence is akin to committing a “self-goal” for any government.