The government insisted on demanding the RBI council's concerns


The government will insist, through its nominees, that a resolution be passed by the Reserve Bank of India (RBI) council on the issues it has raised and a firm decision reached at the meeting on November 19, said people who were knowledgeable about the problem. The government does not want these things to be set aside by referring to the committee as happened lately, they said.

There was a precedent for supporting the council to submit resolutions after discussion of issues raised by members, said one of these people. The upcoming meeting will be a test of how much power the RBI council uses and its influence in decision making.

ET reported on Monday that the government had raised about a dozen problems with the central bank, seeking consultation based on Part 7 of the RBI Act, an option that had never been done before.

There is a growing sense in the government that his concerns about key issues about the economy are ignored by the RBI. This includes the liquidity crisis faced by non-banking finance companies (NBFCs) that the government fears can cause credit to dry up. Another fear is that rapid corrective action (PCA) applied to 11 stressed banks has hurt credit growth.

Differences increased after the last board meeting on October 23 when no resolution was passed on the issue raised by the government and the meeting ended abruptly, ET reported earlier. The government has estimated several issues raised by him to be discussed at the meeting. He did not want repetition and therefore decided to seek decisive action through his representative.

Gurumurthy Letter for Patel

Subhash economic affairs secretary Chandra Garg and financial services secretary Rajiv Kumar are ex officio board members. In August, the government nominated S Gurumurthy and Satish Kashinath Marathe businessmen to the council.

Gurumurthy has written to the RBI governor who complained about the deputy speech of deputy governor Viral Acharya on October 26 who warned about the dangers of undermining regulator autonomy, triggering the latest round of fighting between central banks and the government.


"The RBI law itself says RBI management is entrusted to the council, with governors and deputies mandated to exercise management power subject to the direction of the council," Gurumurthy told ET.

Acharya's speech, according to RBI observers, was triggered by the transfer of Nachiket Mor from the central council and government communications citing Part 7, said the source.


The government has been seeking special financing windows for mutual funds, NBFC and housing finance companies (HFCs); facilities for banks to collect $ 30 billion abroad; relaxation in the limits of corporate bonds for foreign portfolio investors; and hedging requirements must be easier for infrastructure loans less than 10 years.

It also questions the effectiveness of the PCA framework in restoring the health of stressed banks, accumulating conservation capital buffers during stress periods, and loosening general equity capital requirements for banks to levels determined based on Basel III norms.

He also wants a lower risk weight for loans for micro, small and medium enterprises (MSMEs) so that more credit can flow to them and there is a greater possibility for debt repairs and restructuring.

Board members consist of governors, no more than four deputy governors and each of the four RBI regional councils. The rest are the two officials mentioned above and government nominations from various fields.

Other people on board are Chairperson of Tata Sons N Chandrasekaran; former M & M BN chief financial officer Doshi; former chief secretary of Gujarat, Sudhir Mankad; former chairman of the Commission for Agricultural Costs & Price Ashok Gulati; Teamlease Manish Sabharwal, Sun Pharma MD recruitment consultancy director Dilip S Shanghvi, former PK Mohanty and Revathy Iyer bureaucrat, and Research and Information System for Developing Country Director General Sachin Chaturvedi.


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