Thursday, 13 December, 2018

RBI Board meet: Rahul Gandhi hopes Urjit Patel, his team have spine

RBI-Centre standoff: Crucial meeting of central bank’s Board of Directors begins The RBI-Centre conflict: Five things you need to know
Jean Garcia | 19 November, 2018, 16:14

The government on November 9 had said it was discussing an "appropriate" size of capital reserves that the central bank must maintain but denied seeking a massive capital transfer from the RBI.

Top government officials and one independent director have pressed the RBI to ease lending and capital rules for banks, provide more liquidity to the shadow banking sector, support lending to small businesses and to let the government use more of the RBI's surplus reserves to boost the economy.

In a speech last month, RBI Deputy Governor Viral Acharya made a scathing statement about the independence of the central bank and argued that "governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution".

And though the RBI may not announce the special dividend to the government, it will most likely transfer almost Rs 50,000 crore to the Centre this fiscal as well.

The RBI may also climb down from its position of stringent norms for the PCA framework for banks.

Eventually, it will depend on the stance RBI adopts, rather what its reclusive governor Urjit Patel chooses to do at the central bank's board meeting on Monday; so far, Patel has not signalled his intent, adding to the suspense. The banks put under the PCA framework include 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.

"The Reserve Bank of India Governor should work in sync with the government or otherwise resign", SJM's co-convener Ashwani Mahajan had said. Government sources told IANS that the RBI said that inflation was under control, and that it had taken no measure to tighten liquidity in the system.

Cargo ship launch clears crewed mission to space station
An unmanned Russian Progress supply ship is also scheduled to launch from the Baikonur Cosmodrome in Kazakhstan at 1814GMT today. On board the spacecraft were Russian cosmonaut Alexei Ovchinin (the commander of the Soyuz MS-10) and NASA astronaut Nick Hague.

Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. However, the central bank has been averse to the government's demand as it considers the sectors to be vulnerable.

RBI Governor Urjit Patel had meet Prime Minister Narendra Modi last week in a bid to sort out differences between the Centre and the bank regulator.

The third most contentious issue between the RBI and the government is cash reserves.

Former Union Finance Minister P Chidambaram has claimed that the government is determined to capture the Reserve Bank of India and control its reserves.

"There is no proposal to ask RBI to transfer Rs 3.6 lakh crore or Rs 1 lakh crore, as speculated", Economic Affairs Secretary Subhash Chandra Garg had tweeted.

RBI's total reserves stand at Rs 9.59 lakh crore.

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