RBI board meeting today: Will government, central bank reach common ground? Key things to watch

By: | Updated: November 19, 2018 9:59 AM

RBI-Government meet: Since the scale of ongoing conflict became public, the government and the RBI will meet for the first time Monday to discuss key issues ranging from the reserves of the Central Bank to credit to MSMEs.

RBI GOVT MEETThe RBI is also mulling at a possible loan-restructuring to MSMEs, including the size and cutoff for issuing relief to such borrowers.

RBI-Government meet: Ever since the scale of ongoing conflict became public, the government and the RBI will meet for the first time Monday to discuss key issues ranging from the reserves of the central bank to credit to MSMEs. The government has sought a discussion on governance in the RBI and an ‘appropriate’ economic capital framework during the meet, The Indian Express reported citing unidentified sources. The government is also considering a consultative process in decision-making to organise the economic policy framework, the report added.

In addition, reforms in governance in the central bank also form a part of the agenda, the report also said. The RBI is also mulling at a possible loan-restructuring to MSMEs, including the size and cutoff for issuing relief to such borrowers.

However, it’s still to be seen if both government and RBI reach a common ground during the meet.

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Meanwhile, Finance Minister Arun Jaitley on Saturday said that the economic growth must not be slowed down by restricting credit availability and liquidity. He said that the cleaning up of balance sheets of the banks due to “collectively committed sins” between 2008-14 should not  stall the growth. As the tensions with the RBI rose, the Finance Ministry sought discussions under the never-used-before Section 7 of the RBI Act which gives powers to the government to issue directions to the RBI Governor.

In a speech last month, RBI Deputy Governor Viral Acharya had vociferously talked about preserving the independence of the central bank. He had argued that any compromise between the bank and the government could be “potentially catastrophic” for the economy. Thereafter, Swadeshi ideologue S Gurumurthy who is also an independent director on the board of the central bank had last week said the stand-off “is not a happy thing at all” even as MSME creditlimit should be increased.

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