The directors of the RBI Board are likely to push for a greater say in the decision making of the central bank when they meet on Friday.
Since the last meeting of the Reserve Bank of India (RBI) Board on November 19, which ended on a “cordial note”, a lot has happened. Urjit Patel stepped down and the newly-appointed governor Shaktikanta Das took charge. What hasn’t changed is, perhaps, the agenda for the central board meeting scheduled on Friday.
The directors of the RBI Board are likely to push for a greater say in the decision making of the central bank when they meet on Friday, one of the reasons which may have triggered Patel’s resignation. The board is also likely to review the progress of the decisions taken in the last meeting along with the problems being faced by the Medium, Small and Micro Enterprises (MSMEs).
One of the key agenda for the upcoming board meeting will be governance issue — the role of the central board in the decision making of the RBI, news agency PTI reported quoting sources. Currently, the board, which has representatives from the Finance Ministry, plays an advisory role.
The government wants the RBI board to have more say in decision making especially when it comes to issues like single-day default reporting, the news agency reported. The central board is headed by the RBI governor and includes two government nominees and 11 independent directors.
Shaktikanta Das, who will be heading the board meeting on his third day as the RBI governor, vowed to maintain the core values and autonomy of the central bank, while also maintaining that the government is more than just a stakeholder.
“The government is not just a stakeholder. But the government of the day runs the economy, runs the country; manages major policy decisions,” Shaktikanta Das said hours after taking the charge on Wednesday.
The new governor on Thursday held consultation with heads of the Mumbai-based public sector bankers to discuss issues faced by them. It is likely that the long-pending demand of the government to relax the Prompt Corrective Action (PCA), under which 11 PSU banks are facing several lending restrictions, may also come up for discussion.
In the last board meeting, efforts were made to reach a middle ground on contentious issues between the government and the RBI. The board decided to constitute an expert committee to examine the Economic Capital Framework of the RBI.
The government wanted Rs 3.6 lakh crore from the RBI’s reserves but the central bank under Urjit Patel reportedly refused. The government is of the opinion that the RBI’s risk management is too conservative.
The board also advised the RBI to consider a scheme for the restructuring of stressed standard assets of MSMEs. The board while retained 9% capital to risk weighted assets ratio (CRAR), it extended the deadline for meeting Basel-III norms by one year to March 2020.
The matter relating to PCA norms will be examined by the Board for Financial Supervision (BFS) of RBI, the board had decided.
(The story was first published on www.financialexpress.com on December 13, 2018)