Urjit Patel not to resign as tussle between govt & RBI ends

Chennai: The much-awaited meeting of the Reserve Bank of India’s board of directors (BOD) concluded with the apex bank deciding to form a committee on certain contentious issues.

Fears revolving around the future of Urjit Patel, who is at the helm of the central bank, have now been settled as a marathon meet came to an end. The tussle between the RBI and the government, though yet to completey vanish from the scene, have now been put aside, sources stated.

RBI Governor Urjit Patel and his deputies came face to face with government nominee directors – Economic Affairs Secretary, Subhash Chandra Garg and Financial Services Secretary, Rajiv Kumar – and independent members to arrive at a middle ground on some of the contentious issues.

The board meeting lasted for nine long hours but there there was no official word on the deliberations.

According to reports, both sides kept an open mind during the meeting and now the RBI has decided to allow loan restructuring for micro, small and medium enterprises (MSMEs) but liquidity to NBFCs remains a sticking point. It added that the central bank may also open to injecting liquidity through open market purchases of bonds but is resisting relaxing capital buffers for banks.

The Reserve Bank of India is likely to consider a case by case review reserve ratios of some of the PSU banks. In the last quarter (July-September) gone by, the cumulative losses of all State-run banks escalated to nearly three-and-half times to Rs 14,716.2 crore following the ballooning of non-performing assets.

It may be noted that RBI has an 18-member board, headed by the governor Urjit Patel, which includes four Deputy Governors, government nominees Department of Economic Affairs Secretary, S C Garg and Financial Services secretary Rajiv Kumar, aside from non-official director including S Gurumurthy and Satish Marathe.

Earlier last month, Viral Acharya, RBI Deputy Governor had warned of economic consequences if the RBI’s autonomy was encroached upon.

No confrontations

Union minister Piyush Goyal denied any confrontation between the Centre and the RBI. Goyal also said there was nothing objectionable in discussions among the members of RBI’s BOD about the central bank’s responsibilities towards the country.

In reply to a question amid the important meeting of RBI’s BOD, Goyal said, ‘We are not seeing any tension between government and the RBI. The government has already clarified that it has not asked for even a single rupee from RBI’s reserve fund.’

However, Goyal said as an important national institution, the RBI has some responsibilities towards the country. No person should have any objection, if the central bank’s board discusses these responsibilities in the national interest.

Former RBI Governor Raghuram Rajan had said the rift can be resolved only if both sides respect each other’s intent and autonomy.

Miscellaneous reports
Earlier before the BOD began, reports stated that the government had proposed changing rules to allow closer supervision of central bank functions by its board.

The government has recommended that ‘the board of the Reserve Bank of India (RBI) draft regulations to enable setting up of panels to oversee functions including financial stability, monetary policy transmission and foreign exchange management’, said a foreign news agency on Friday quoting sources.

The move is meant to empower the regulator’s board, which includes government nominees, and give it a supervisory role, it added

The recommendations being considered include setting up several committees comprising two to three board members each. The body has the powers to frame rules under Section 58 of the Reserve Bank of India Act, 1934 and no legislative change is required.

The RBI’s board regularly advises and guides the regulator, leaving the decision-making to the governor and his colleagues.

NT Bureau