Former Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday waded into the ongoing tussle between the RBI and the finance ministry, giving solid support to the central bank\u2019s assertion of its autonomy and opining that its board would do well to keep the tradition of not taking \u2018operational decisions\u2019 and only giving wise counsels in the interest of overall institutional health. Rajan\u2019s views could weigh in favour of the RBI brass, which is set to hammer out a clutch of contentious issues including the way the RBI is governed, with an insistent group of government nominees on its board as it meets next on November 17. In separate teleconference interviews given to two Indian TV channels from the US, the former IMF chief economist \u2014who many believe left the RBI in September 2016 ending a three-year tenure at its helm as the NDA government was not keen on his continuing \u2014 however, seemed to back the government on how to resolve the current cash crunch in the non-banking financing sector \u2014 via injection of liquidity facilitated by RBI. Also, while the government is weathering political heat over the Prime Minister\u2019s Office (PMO) allegedly not acting promptly on a list of large defaulters of bank loans sent to it by Rajan when he was the RBI governor, he told ET Now he saw \u201cthe political will to bring frauds to book\u201d. While a fiscally constrained government is seeking an unprecedentedly high amount from RBI its \u201csurplus reserves\u201d as dividend, Rajan reiterated that RBI ought not to pay \u201cmore than profit,\u201d and added that extraordinary dividend by it would lead to an inflationary situation and consequent rise in interest rates. \u201cThere are no free lunches with dividends. there is no Rs 3 lakh crore (the amount some reports say the government sought) to give to the government. Giving dividend and then sucking out liquidity will not change the borrowing programme,\u201d he said. Also Read:\u00a0Don\u2019t dig deep into central bank reserves, warn Highlighting the distinction between a solvency crisis and a \u2018pure liquidity\u2019 issue \u2014 the former would involve the hazard of bailing out th private NBFCs with taxpayer money, Rajan told CNBC TV18: \u201cIf it\u2019s a liquidity problem, the central bank can flood the market with liquidity or give the liquidity to specific private entities that are healthy, and are willing to lend to these other entities that are in trouble.\u201d Although the RBI insisted for a while that NFBCs did not face a liquidity crisis, it last Friday allowed banks to offer partial credit enhancement (PCE) to bonds issued by NBFCs and housing finance companies (HFCs). The PCE enables a company to improve its creditworthiness by securing a backing from a higher-rated entity (a bank, in this case). Commenting on the role of the RBI board, comprising some of the government nominees who had been reportedly pushing the Centre\u2019s agenda vigourously, Rajan said: \u201cIt (RBI board\u2019s aim) is to protect the health of the institution, but also to provide wide, sensible advice. the aim of the board is to be a Rahul Dravid, sensible, thoughtful and not, with due respect, Navjot Singh Sidhu (considered too loud).\u201d \u201cThe RBI is something like a seat belt. As a driver, the driver being the government, it has the possibility of not putting on a seat belt but of course if you do not put on your seat belt you get into an accident and the accident can be quite severe,\u201d he said. Also Read:\u00a0Happy Diwali for infra firms! RBI follows Modi government\u2019s suggestions, relaxes ECB Historically, the relationship between the RBI and the government has been precisely this \u2014 the government wants to focus on improving growth and it does all it can within the limits set by the RBI which are based on financial stability. \u201cSo, the government will push, will try and get the RBI to be more lenient,\u201d he said, adding the central bank would examine them in close details and in reference to risks to financial stability. \u201cWe (RBI) have responsibility for financial stability and therefore we have an authority to say no,\u201d he said. The long-simmering tension between the ministry and the RBI on issues \u2014 including the transfer of surplus capital with the central bank to the government, changes to the corrective regime for weak banks and special liquidity window for non-banking finance companies \u2014flared up recently when RBI deputy governor Viral Acharya delivered a scathing speech on election-bound governments\u2019 intrusion into the central banks\u2019 autonomous space. Governments that make incursion into central banks\u2019 autonomous regulatory space \u201cwill sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution\u201d, he added. The tension had come to a boiling point when the Centre invoked a never-used Section 7 of the RBI Act to seek consultations with the central bank on contentious issues.