RBI To Study Surplus Funds Transfer to Govt, Next Meet on 14 Dec
RBI To Study Surplus Funds Transfer to Govt, Next Meet on 14 Dec
(Photo altered by The Quint)

RBI To Study Surplus Funds Transfer to Govt, Next Meet on 14 Dec

To follow all the RBI updates live, click here.

The key meeting of the Reserve Bank of India’s board of directors concluded in Mumbai on Monday, 19 November after over 9 hours of discussions.

The CIC held a hearing on the show cause notice issued to RBI governor Urjit Patel at 1 pm on Friday, 16 November.

Ahead of the RBI board meeting today, the rift between the government and RBI has healed to some extent, with the central bank’s Governor Urjit Patel unlikely to step down, reported Reuters, quoting sources.

Snapshotclose

  • The CIC had issued a show-cause notice to Urjit Patel on 4 November for “dishonouring” an SC judgment on disclosure of wilful defaulters’ list
  • The government is said to have sought consultations under Section 7 of the RBI Act, which empowers it to give directions to the central bank in public interest, after consultation with the Governor
  • On 31 October, the Finance Ministry had issued a statement clarifying that the government nurtures and respects the autonomy of RBI
  • Patel is serving as the 24th Governor of RBI since September 2016
NEWEST FIRSTOLDEST FIRST
(3) NEW UPDATES

Urjit Patel Likely to Step Down Today

Urjit Patel is likely to step down as the Governor of the Reserve Bank of India on Wednesday, 31 October, CNBC-TV18 reported.

(The Quint is now available on Telegram and WhatsApp. For handpicked stories every day, subscribe to our Telegram and WhatsApp channels)

More Bad News Likely: P Chidambaram

Former Finance Minister P Chidambaram took to Twitter to say that the government may have invoked Section 7 of the RBI Act and issued unprecedented ‘directions’ to the RBI.

Government Issues Letters to RBI Initiating Consultations Under Section 7 of RBI Act

The government of India has sent letters to the RBI, initiating a consultative process under section 7 of the RBI Act, BloombergQuint reported. The letters have reportedly been issued on the subject of “prompt corrective action.”

Letters of Consultation Issued, But No Directions Given

The government has issued “several” letters to the Reserve Bank of India initiating consultations under Section 7 of the RBI Act, BloombergQuint reported.

While consultations have been initiated under this provision, no directions have been given, said this person.

Among the issues where consultations have been initiated include the prompt corrective action framework for weak banks, sources told BQ.

Economy Slumps Further: Sitaram Yechury

After the latest developments in RBI, Sitaram Yechury took to Twitter to slam the Modi government for making a “mess” of the economy.

KEY EVENT

'Government Respects And Nurtures RBI's Autonomy'

The Finance Ministry has issued a statement and clarified that the government nurtures and respects the central banks autonomy.

“For the purpose, extensive consultations on several issues take place between the Government and the RBI from time to time. This is equally true of all other regulators.,” the statement added.

The Finance Ministry has further clarified that the government has never made the subject matter of those consultations public.

“The Government , through these consultations, places its assessment on issues and suggests possible solutions. The Government will continue to do so.”

Rupee Off Day's Low

The rupee has risen above the day's low of 74.14 per dollar and is now trading at 73.93, in response to the government’s clarification on its tussle with the Reserve Bank of India.

(Source: BloombergQuint)

Public Airing of Rift Must Stop, Says Former RBI Deputy Governor Rakesh Mohan

Speaking to BloombergQuint, the former RBI Deputy Governor said the public sparring between the Centre and the central bank is not healthy for the economy.

Mohan added, “Such tussles distract from the functioning of the Reserve Bank and impact the confidence that markets and observers have in the country’s central bank.”

It Is Sad If Things Come Down to Invoking Section 7: TCA Raghavan

Speaking to BloombergQuint, columnist TCA Raghavan said that the statement from the government is very “bland” and that it will be sad if it comes down to invoking section 7 of the RBI Act.

“The government needs to decide on whether it needs RBI's money to bring down fiscal deficit or give people sops,” Raghavan added.

'It's Partly an Ego-Clash': Columnist Sanjaya Baru

Speaking to BloombergQuint, Columnist Sanjaya Baru called the clash between the Centre and the central bank an ego-clash and said, “This is partly an ego-clash, and partly a case of genuine differences. Government has to listen to the RBI's views, but RBI's word can't be the final one.”

He further called RBI Deputy Governor Viral V Acharya’s speech “immature” and said that the buck stops with the government.

P Chidambaram Questions Government's Statement

Former Finance Minister P Chidambaram questioned the government’s statement and said that if it contained truth then “why was it necessary to issue the statement”?

How RBI Issue Affects Markets

Speaking to BloombergQuint V Anantha Nageswaran, Dean of IFRM Business School said that he was disappointed with RBI Deputy Governor Viral Acharya's comments saying “financial markets will bring errant governments in line.”

Ananth Narayan, professor at the SP Jain Institute of Management & Research, on the other hand, said that any interference in the RBI's decisions may affect foreign investment into the country. "If external investors start comparing India with the likes of Turkey instead of the US, the outcome won't be good," he said.

(Source: BloombergQuint)

Ahmed Patel Takes a Dig at Modi Govt Over RBI Issue

Congress leader Ahmed Patel took a dig at Prime Minister Narendra Modi’s government by asserting that Sardar Patel’s legacy draws from his “remarkable ability to strengthen institutions.”

Today, institutional undermining of RBI is betrayal to his legacy. Institutions successive governments helped build over last 70 years are being systematically dismantled in just 5 years.
Ahmed Patel, Congress Leader

Every Institution Patel Helped Build Is Being Smashed: Rahul

Congress President Rahul Gandhi said that it was “ironic” that a statue of Sardar Patel was inaugurated at a time when every institution “he helped build is being smashed.”

KEY EVENT

RBI Board to Meet on 19 November

The RBI's Central Board, headed by Governor Urjit Patel, is scheduled to meet in Mumbai on 19 November, sources said amid reported rift between the government and the central bank over certain key issues.

Sources said it is a pre-scheduled and routine meeting of the central board of the RBI. The last meeting of the board was held earlier this month.

This would be the first meeting of the board after RBI's Deputy Governor Viral Acharya highlighted the issues concerning the independence of the central bank.

Urjit Patel Needs to Fall in Line or Resign: RSS Member

Ashwani Mahajan, a key member of the Rashtriya Swayamsevak Sangh (RSS) told Reuters in an interview that RBI Governor Urjit Patel should either work in tandem with the government or should submit his resignation.

Mahajan, the chief of the Hindu nationalist group’s economic wing Swadeshi Jagran Manch told the newswire in an interview that Patel must “restrain his officials from making differences public”, thus fanning news of the widening rift between the central bank and the government.

Govt Now Bullies the RBI: Sitaram Yechury

Secretary General of the Communist Party of India (Marxist), Sitaram Yechury says that the Modi government has written off loans of “rich defaulter” and now is “bullying” the RBI.

'Opening Special Window to NBFCs Can Lead to Misuse'

The Reserve Bank of India fears that opening a window for non-banking financial companies (NBFCs) and housing finance companies might lead to misuse of such a facility, The Indian Express reported quoting sources.

“There’s adequate liquidity available for the sector through normal channels. But we won’t be able to prevent companies as it is difficult to distinguish between the asset quality of NBFCs government sought the central bank’s views on the formula for calculation of its reserves and the consequent surplus transfer to the Centre to partly address the issue of liquidity shortage in financial markets,” the source told The Indian Express.

CII Seeks Urgent Action by RBI

Industry body Confederation of Indian Industry (CII) appealed for immediate action from the Reserve Bank of India to maintain stability in the financial sector.

The CII said in a statement said that it feared the liquidity crunch faced by non-banking lenders could spill over to allied sectors like mutual funds, housing finance companies and banks. The industry body pointed out that non-banking and housing lenders suffered from asset-liability mismatches as they had borrowed short to lend long. This, according to the statement, could set off a chain of problems as the non-bank lenders have borrowed from mutual funds and banks.

(Source: BloombergQuint)

Patel’s Reluctance to Engage With Stake Holders Led Govt To Take Legal Step: Report

In the days leading up to the invoking of never-before-used Section 7 of the RBI Act by the Modi government, a highly placed source speaking to The Times of India said that RBI governor's reluctance to engage with stakeholders led the government to consider the extreme step.

"He was scarce and unavailable to bankers, industry and market players even on matters of pressing concern. We were left with no choice. It's the only way we could bring the central bank to the table," one person close to the development told TOI.

IMF Extends Support to RBI on Govt Interference

The International Monetary Fund on Thursday said that it is closely monitoring the development in India with regard to the reported rift between the Reserve Bank of India and the Centre.

Expressing its displeasure, the IMF opposed any move that compromises with the independence of central banks anywhere in the world.

"We are monitoring the development on that issue and will continue to do so," IMF Director of Communications Gerry Rice told reporters on Thursday when asked about the RBI row.

Top Bureaucrat Mocks RBI Deputy Governor Viral Acharya

A top civil servant took a subtle dig at RBI Deputy Governor Viral Acharya after his ‘warning’ that governments that interfere with central banks suffer the “wrath of the markets”.

Subhash Chandra Garg, secretary in the finance ministry's department of economic affairs, took to Twitter on Friday, 2 November, saying:

Also Read : Market can make govt pay for eroding central bank's independence: Viral Acharya

RSS' Economic Wing Decries IMF Interference: Reports

In an interview with India Today, Ashwani Mahajan, the national co-convenor of the economic wing of the RSS Swadheshi Jagran Manch (SJM) asked the IMF not to interfere in India’s internal affairs and to instead focus on the troubled economies of the world.

Talking to India Today, Dr Mahajan said, "Our systems work under the law and the RBI Act at present and we know how to maintain autonomy." He said the IMF should look after those economies that are defaulters. "Ours is a growing economy due to the policies of Modi government. Our foreign reserves are very high and we are also among the world’s top six economies in terms of GDP," he said.

Show-Cause Notice Issued to RBI Guv Over Wilful Defaulters’ List

The Central Information Commission has issued a show-cause notice to Reserve Bank of India Governor Urjit Patel for "dishonouring" a Supreme Court judgment on disclosure of wilful defaulters' list.

The CIC has also asked the Prime Minister's Office, the Finance Ministry, and the RBI to make public, former RBI Governor Raghuram Rajan’s letter on bad loans.

Irked over the denial of information on the disclosure of the names of wilful defaulters who have taken bank loans of Rs 50 crore and above by the RBI in spite of a Supreme Court order, the CIC has asked Patel to explain why a maximum penalty not be imposed on him for "dishonouring" the verdict, which had upheld a decision taken by the then Information Commissioner Shailesh Gandhi, calling for disclosure of names of wilful defaulters.

Also Read : Show-Cause Notice Issued to RBI Guv Over Wilful Defaulters’ List

Finance Ministry Wants Rs 3.6 Lakh Crore From RBI, Central Bank Objects

A proposal by the finance ministry seeking transfer of a third of RBI’s reserves, i.e. Rs 3.6 lakh crores, is at the root of the standoff between both.

While the government thinks that the RBI has over-estimated its capital reserve requirements and it can use these funds, sources have confirmed to The Indian Express that the RBI thinks this attempt will have a grave impact on macro-economic stability.

Also Read : Post Note Ban, People Withdraw More Cash – Here’s the Proof

Will Not Let NDA Govt Exploit RBI Autonomy: Manish Tewari

Speaking at a press conference, Congress leader Manish Tewari said that the NDA government would not be allowed to exploit the Central Bank’s autonomy for their own political gains.

“We will not let the RBI’s autonomy be sacrificed for the NDA government’s political gains,” Tewari said.

He also said that the NDA government had been toying with the country’s economy as well as its traditions and customs since they came into power in 2014.

PM Modi Needs Rs 3.6 Lakh Crore to Fix the 'Mess' Created by His Economic Theories: Rahul Gandhi

Congress president Rahul Gandhi Tuesday attacked Prime Minister Narendra Modi over a media report which claimed the government is seeking Rs 3.6 lakh crore from the Reserve Bank of India (RBI), alleging that he needs the amount to fix the "mess his genius economic theories" have created.

Gandhi also urged Reserve Bank Governor Urjit Patel to "stand up" to the prime minister and "protect the nation".

(PTI)

Urjit Patel Likely to Step Down as RBI Governor: Report

Quoting sources, MoneyLife has reported that Patel is likely to resign at the board meeting scheduled for 19 November if the feud between the government and the central bank persists, which has reportedly taken a toll on his health as well.

Sources told the website that Patel could cite his health as the reason for his decision – as he is “tired of the fight with the government.”

KEY EVENT

RBI Governor Met PM Modi To Resolve Ongoing Issues: Reports

RBI Governor Urjit Patel met PM Narendra Modi in Delhi on 9 November to find a middle ground amid the ongoing tussle between the government and the central bank, reported BloombergQuint, citing two officials aware of the development.

The meeting comes against the backdrop of the government seeking consultations under Section 7 of the RBI Act, which empowers the government to give directions to the central bank in public interest, after consultation with the Governor. The government has sought consultations on nearly a dozen issues

Sources cited by PTI said Patel was in the New Delhi on Friday and met senior officials in the Prime Minister’s Office (PMO).

There is a possibility the central bank may bring in a special dispensation for lending to micro, small and medium scale enterprises.

Patel's meetings at the PMO came days before the RBI's crucial board meeting on 19 November during which contentious issues are likely to come up for discussion.

KEY EVENT

Government, RBI Close to Ironing Out Differences

Ahead of the RBI board meeting next Monday, the rift between the government and RBI has healed to some extent, with the central bank’s governor Urjit Patel unlikely to quit anymore, news agency Reuters reported quoting sources.

RBI on its part, the sources suggest, could agree to tweak restrictions on lending to improve credit flows for smaller companies with a borrowing limit of Rs 25 crore.

CIC to Hold Hearing On Show Cause Notice Served to Urjit Patel

The Central Information Commission (CIC) will, on Friday, 16 November, at 1 pm hold a hearing on the show cause notice issued to RBI governor Urjit Patel on 2 November, reports the Leaflet.

The PMO was also directed to make available the action report on former RBI Governor Raghuram Rajan’s letter to the prime minister regarding NPA.

KEY EVENT

RBI-Govt Tension Not a Happy Situation: S Gurumurthy

Ahead of the much talked about board meeting of the central bank, RBI board member S Gurumurthy said the stand-off between the government and the Reserve Bank was not a happy situation.

Delivering a lecture on 'State of the Economy: India and the World' at the Vivekananda International Foundation (VIF), Gurumurthy also said imposition of tight provisioning norms for bad loans in one go created problems for the banking system.

Gurumurthy further said India should not go beyond what has been prescribed in the Basel capital adequacy norms and made a case for enhancing credit for the MSME sector.

KEY EVENT

Key Meeting of RBI's Board Members Begins in Mumbai

The key meeting of the central bank’s board members has begun in Mumbai. The meeting will most likely address the ongoing rift between the RBI and the government.

The RBI has an 18-member board, which also includes four deputy governors, government nominees department of economic affairs secretary S C Garg and financial services secretary Rajiv Kumar, besides non-official director including S Gurumurthy and Satish Marathe.

KEY EVENT

Congress Prez Gandhi Slams Govt for 'Destroying RBI"

Minutes before the Reserve Bankof India board meeting, Congress President Rahul Gandhi slammed the government in a tweet on Monday, 19 November. The Congress supremo alleged that “PM Modi and his puppets will attempt to destroy the RBI”.

KEY EVENT

Capital Framework, Liquidity Issues on Agenda

The Reserve Bank of India’s board meeting is expected to be a stormy affair against the backdrop of the ongoing tussle between the government and the central bank, sources said, adding some members are likely to raise issues concerning capital framework, management of surplus and liquidity measures for small businesses.

According to sources, the board meetings are pre-decided and the agenda is also circulated much in advance. However, board members can raise off-agenda items in the meeting.

Sources said the government nominee directors and a few independent directors could raise the issue of interim dividend along with the capital framework of the RBI.

(Source: PTI)

Board Meeting Breaks for Lunch

RBI Board breaks for lunch, meeting to resume after lunch, reports CNBC-TV18.

Rupee Pare Losses Amid RBI Board Meeting

The Indian rupee pared losses against the U.S. dollar amid the ongoing RBI board meeting. The home currency appreciated as much as 0.21 percent to trade at 71.77 against the greenback.

(Source: Bloomberg Quint)

RBI-Govt Meeting Concludes

The key meeting of the Reserve Bank of India’s board of directors concludes in Mumbai on Monday, 19 November, after over 9 hours of discussions.

RBI To Take Measures on Improving Liquidity

The RBI in the board meet decided to improve liquidity, Reuters reported. The RBI is also likely to ease curbs on some state run banks’ reserve ratio.

RBI to Form Panel To Study Surplus Funds Transfer to Govt

The RBI will form a panel to study the transfer of surplus funds to the government, the BloombergQuint reports quoting Board Member Sachin Chaturvedi.

The RBI board will meet next on 14 December, Chaturvedi says.

RBI Board Meet: Key Takeaways

  • The board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI.
  • The board advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 250 million, subject to such conditions as are necessary for ensuring financial stability.
  • The board, while deciding to retain the CRAR at 9%, agreed to extend the transition period for implementing the last tranche of 0.625% under the Capital Conservation Buffer, by one year, i.e, up to 31 March, 2020.
  • With regard to the banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision of RBI.

Glad that Centre Stepped Back, Tweets Chidambaram

Former finance minister P Chidambaram tweeted that he was “glad” that the Centre “grudgingly” acknowledged the independence of the RBI.

Follow our India section for more stories.

    Also Watch