RBI board steers clear of taking decision on diluting governor’s power, for now

By: | Updated: December 14, 2018 5:23 PM

"The board deliberated on the Governance Framework of the Reserve Bank and it was decided that the matter required further examination," the RBI said in a statement.

The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination, said RBI.The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination, said RBI.

On his third day, the new governor of Reserve Bank of India (RBI), Shaktikanta Das, chaired the central bank’s board meeting, which did not take any decision on the issue of the governance framework.

The centre wants the RBI board, which includes two government nominees, to have more say in the decision-making process. Currently, the RBI board plays an advisory role and the decision-making power lies with the governor and the deputies.

The board, meanwhile, also reviewed the current economic situation, liquidity issues and credit flow among others. There was no deliberation on relaxing Prompt Corrective Action (PCA) norms even as public sector bank heads pitched for it on Thursday in a meeting with the governor.

“The board deliberated on the Governance Framework of the Reserve Bank and it was decided that the matter required further examination,” the central bank said in a statement.

“The Board reviewed, inter alia, the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy, and issues related to currency management and financial literacy,” the RBI added.

Unlike the last board meeting, which took place amid the rift between the government and former RBI governor Urjit Patel for almost nine hours, this meeting was shorter.

Meanwhile, at the last board meeting, there were efforts made to reach a middle ground on controversial issues between the government and the RBI. The RBI board had 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.

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