Urjit Patel’s Board Meet: What Is It All About
RBI Governor Urjit Patel called for a board meeting on November 19, to discuss and clear the pending issues, which created the fight between the government and the central bank, in the last week meeting. So, it seems Urjit Patel is not going to resign.
On the other hand, the finance ministry has given a word that it will respect the central bank’s autonomy.
The autonomy of the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this,” said the economy affairs department of the finance ministry.
The government did not deny reports that it invoked Section 7 of the RBI Act 1934 to initiate discussions on different issues, which includes easing prompt corrective action (PCA) framework and providing liquidity to the non-banking finance companies (NBFCs).
According to the provision, after consulting the RBI Governor, the Central government may issue directions to the RBI as it may consider necessary in public interest.
The ministry said that both the government and RBI should have to be guided by public interests and Indian economy requirements.
The government and the RBI have had the disagreements recently, regarding easing capital adequacy norms for public sector banks, bringing some of them out of PCA, forbearance for the MSMEs and liquidity situation in NBFCs, and some other issues.
Also, the finance ministry said that there are several consultations had taken place between the government and the bank and this is also true for other regulations.
The government places its assessments on issues through these consultations to find out the best possible solutions.
When the RBI Deputy Governor Viral Acharya had given a powerful public speech about the independence of the central bank, the dispute between the government and the RBI got huge popularity.
If the government didn’t respect the independence of central bank, it should have to face outrage of the financial market, said Acharya.
Acharya also said that the central bank must possess more powers to supervise public sector banks, to keep balance sheet strong, and to have an adequate regulatory scope to secure greater financial and macroeconomic stability.