RBI board meeting underway to discuss new economic capital framework

RBI board meeting underway to discuss new economic capital framework
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Highlights

The crucial central board meeting of the Reserve Bank is underway on Friday morning to discuss contentious issues including a new economic capital framework ECF for the central bank and relaxation in the prompt corrective action norms for at least some of 12 staterun banks

The 18-member RBI board will also deliberate on relaxation of prompt corrective action norms.

Mumbai: The crucial central board meeting of the Reserve Bank is underway on Friday morning to discuss contentious issues including a new economic capital framework (ECF) for the central bank and relaxation in the prompt corrective action norms for at least some of 12 state-run banks.

This is the first board meet chaired by the newly- appointed Shaktikanta Das, who took over as the 25th governor on Wednesday.

In the previous board meeting, held on November 19, the board had decided to constitute a committee of experts to fix the appropriate level of economic capital framework (ECF) that the central bank should hold at any given time and the membership and terms of reference of which will be jointly determined by government and RBI.

The issue of transfer of RBI's excess reserves, which stood at Rs 9.43 lakh crore as of June 2018, to the government has been one of the contentious issues between the government and the central bank for a long time and also one of the key reasons for the sudden resignation of Urjit Patel on Monday.

The 18-member RBI board will also deliberate on relaxation of prompt corrective action norms.

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

These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

On Thursday, Das met the chiefs of a few state-run banks to discuss their concerns. Lenders requested the governor to ease the PCA norms and also sought relaxation in the one-day default norm announced in the February 12 RBI circular on reclassification of NPAs.

At the November 19 meeting, the RBI board had also decided to refer the issue of relaxing PCA framework to the Board of Financial Supervision (BFS) of the central bank.

Unlike the last meet, which lasted for 10 hours, Fridays meeting is likely to get over by afternoon.

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