Governor Shaktikanta Das assures RBI board to discuss all key issues with government
Governor Shaktikanta Das Friday assured the Reserve Banks central board to discuss the deliberations on capital management and governance with government for an early resolution,sources said
MUMBAI: Governor Shaktikanta Das Friday assured the Reserve Bank's central board to discuss the deliberations on capital management and governance with government for an early resolution,sources said.
Das, who was chairing the keenly-watched board meeting following his appointment earlier this week, listened to all the points of discussions, including those which had caused discomfort within the RBI brass, they said.
The four-hour meeting was very smooth and cordial, the sources familiar with board deliberations, said, adding however, did not clarify on what are the core issues which need to be ironed out.
It is understood that the key issues of friction are giving government a say in the capital management of the central bank's over Rs 9.6 trillion in reserves and also relaxing the stiff conditions imposed on banks under the prompt corrective action, which prevents regular lending.
As many as 11 of the 21 state-run banks along with a private sector lender are under the PCA framework since September 2017, which the poll-bound government claims, has dried up growth funds to the industry to some extent.
There is a possibility that a formal proposal will be brought before the board at its next meet in mid-January, which is likely to happen in New Delhi, the sources, said.
"The board may also come to a conclusion as early as at the next meeting itself," they added.
In a short statement after the meeting, RBI said the "board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination".
The board also reviewed "the matters relating to liquidity and credit delivery to the economy", it added.
In the four-hour meeting, economic affairs secretary SC Garg, flagged government's concerns, they said, adding there was no formal presentation, though.
At the meeting, the first after the sudden resignation of Urjit Patel, the board "placed on record its appreciation of the valuable services rendered by Patel during his tenure as the governor and deputy governor of the Bank."
In the previous meeting held on November 19, which lasted over 10 hours, the board had decided to constitute a six-member panel of experts to fix an appropriate level of economic capital framework for the central bank which would decide how much contingency reserves it should hold at any given time and the membership and terms of reference of which will be jointly determined by government and RBI.
Nothing has officially progressed on the matter as government and RBI are not yet on same page on the name of the chairman of the six-member panel.
The issue of transfer of RBI's excess reserves to government has been one of the contentious issues between government and the central bank for a long time and also one of the key reasons for the sudden exit of Patel.
At the last meet, the RBI board had also decided to refer the issue of relaxing the PCA framework to the board of financial supervision of the central bank.
It can be noted that some of the new government nominees on the RBI board have been demanding that the central bank should be run by the board and not just by the management, which is the practice at all the major central banks.