RBI board meeting today; decision on ‘ongoing rift’ with govt likely

Amid growing tensions with the central bank, the Finance Ministry had sought discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

RBI board meeting today; decision on ‘ongoing rift’ with govt likely
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By: ABP News Bureau
Updated: 19 Nov 2018 09:40 AM
New Delhi: The ongoing rift with the government is set to play out at the RBI's crucial board meeting today, with the Finance Ministry nominees and some independent directors expected to take on Governor Urjit Patel and his team over issues ranging from MSME credit to the central bank's reserves, though both sides are in favour of reaching a common ground.

Pressure builds on Governor: While there have been reports and demands from some quarters for the Governor to step down, sources said Patel is unlikely to yield under pressure and will rather mount a strong defence of the central bank's policies regarding stringent NPA recognition norms as well as measures taken to ease credit supply to MSMEs.


Patel and his four deputies, who all are members of the RBI's 18-member central board, will present a united front, while a few independent directors too are  expected to support the central bank's mission to clean up bank balance sheets, sources said.

The central board, headed by the RBI Governor, is expected to discuss issues mentioned in the agenda circulated to the board members in advance.

Off-agenda items can also be raised in the meeting, with the chair's permission.

Sources said the government and Reserve Bank of India (RBI) are looking to reach at an agreeable solution with respect to relaxation of the Prompt Corrective Action (PCA) framework and easing of lending norms for the MSME sector.

If not in this board meeting, the issue of relaxation of PCA framework would reach a resolution in the next few weeks, they added.

As a result of the relaxation, some banks may come out of the PCA framework by the end of this fiscal.

Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.

Growth must not be throttled: Arun Jaitley: Meanwhile, Finance Minister Arun Jaitley on Saturday said that growth must not be throttled by limiting credit availability and liquidity.

It is necessary that the growth process does not suffer due to the cleaning up of the banking system from the "collectively committed sins" during 2008-14 when the regulatory mechanisms also overlooked high debt accumulation, he said.

Amid growing tensions with the central bank, the Finance Ministry had sought discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

Compromise could be harmful for economy: RBI Dy Governor: RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy.

In his first public comments since the spat between the RBI and the Finance Ministry came out in the open, Swadeshi ideologue S Gurumurthy had last week said the stand-off "is not a happy thing at all".

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