New Delhi : The ongoing rift with the government will be played at the RBI's major board meeting on Monday,…
New Delhi : The ongoing rift with the government will be played at the RBI’s major board meeting on Monday, with nominated finance ministries and some independent leaders expected to address Governor Urjit Patel and his team on issues ranging from MSME credit to the central bank’s reserves, although both sides are in favor of achieving a common reason.
Although there are reports and requirements from some places for the governor to go down, Patel says that it will not be under pressure and will rather put a strong defense against central bank policy regarding strict NPA recognition standards and measures taken to facilitate the MSME credit offering.
Patel and his four deputies, all of whom are members of the RBI 1
8-member central government, will present a united front, while some independent leaders are also
is expected to support the central bank’s mission to clean up the bank’s balance sheets, says sources.
The central board, responsible for the governor of the RBI, is expected to discuss issues mentioned on the agenda sent to board members in advance.
Undeclared items can also be raised in the meeting with the chair’s permission.
The central administration of the RBI currently has 18 members, but the rule is that it can go up to 21.
The members include governor Urjit Patel and his four alternates as “full-time staff” while the other 13 have been nominated by the government, including two officials at the Ministry of Finance – secretary of finance and finance secretary.
Sources said the Government and Reserve Bank of India (RBI) seem to achieve an appealing solution with regard to the relaxation of the hotfix
Unless at this board meeting, the issue of PCA framework relaxation 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 at the end of this tax expense.
Of the 21 state banks, 11 are under the PCA framework which lends 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.
kicks in when banks violate any of the three most important regulatory triggering points – namely capital to risk-weighted assets, net gross assets (NPA) and return on assets (RoA).
Globally, PCA only kicks when banks release a single capital adequacy ratio, and the government is pleased that this practice is also adopted for the domestic banking sector.
RBI is also expected to consider a special dispensation for micro, small and medium sized enterprises (MSME) and non-bank financial companies (NBFC) that have had liquidity issues.
The government believes that the MSME sector – which employs about 12 crore people and plays a crucial role in the economy – needs some support after being affected by demonetization and implementation of GST (Goods and Services Tax).  However, the central bank has deviated from government demand, as it considers the sectors vulnerable.
At the same time, Finance Minister Arun Jaitley said that growth should not be hampered by limiting credit availability and liquidity.
It is necessary that the growth process does not suffer because the banking system is cleaned from “collective gifted sins.” “In 2008-14, when the regulatory mechanisms overlooked high debt accumulation,” he said.
The Ministry of Finance had, in the context of growing tensions with the central bank , sought discussions in accordance with the RBI Act, which was never used to the government to issue directions to the RBI governor.
RBI Vice Governor Viral Acharya spoke in a speech last month about the independence of the central bank and argued that any compromise could being “potentially disastrous” for the economy.
In its first public comments since the Sprinkle between the RBI and the Ministry of Finance appeared in the open, the Swadeshi ideologist, S Gurumurthy, said last week that the stand-off is “not a happy thing at all”.
Gurumurthy, who was appointed to the board of RBI a few months back, had said that the capital adequacy ratio s If provided in India, 1 percent is higher than the Global Basel standards. He also succeeded in easing lending standards for small and medium-sized enterprises, accounting for 50 percent of the country’s GDP.
Last month, RSS-linked Swadeshi Jagran Manch said the RBI governor should work in sync with the government or resign.
“India’s governor’s Reserve Bank should work in sync with the government or otherwise resign,” said SJM convenor Ashwani Mahajan.