Mumbai, Feb. 8 -- Former Reserve Bank of India (RBI) governor Y.V. Reddy on Friday said the government, which has a weak fiscal balance sheet, needs to ensure that at least the central bank's balance sheet remains strong. The government has the power to exercise claims over RBI reserves but the way it exercises this right gives signals to the market and influences public opinion, he said.

"The government may like to assure the markets that its central bank has the capital to meet contingencies that may arise without depending on governments," said Reddy in a speech titled Central Banking in India: Retrospect and Prospect at the Kale Memorial Lecture at Gokhale Institute of Politics and Economics on Friday.

"There is merit in keeping at ...