HYDERABAD: Reserve Bank of India (RBI) Governor Shaktikanta Das’ first central board meeting on Friday will start from where it was left behind last month. The meeting would include addressing contentious issues including liquidity in the system, and more importantly, on governance within the RBI.
“These issues are coming up in a major way...we will try to address them in an amicable way,” sources told The New Indian Express.
They added that the job of the central board, particularly that of its independent directors, was to bring both views — that of the government and the RBI — with regards to a liquidity crisis and see if a temporary solution can be found. While the October board meeting ended inconclusively, last month’s meeting saw the board resolving four out of the 12 items on agenda.
As for governance demands pitching for superior presence in the internal committees of the central bank, sources said, no such item was on the table. Currently, these committees — such as the Board of Financial Supervision and Committee of the Central Board — have RBI representatives and are chaired by the Governor, while some committees have the token presence of one of the board members.
Meanwhile, Friday’s board meeting is expected to determine the terms of reference for the proposed Economic Capital Framework (ECF), members for which are likely to be appointed shortly. Sources confirmed that the government decided to rope in two former RBI veterans — Bimal Jalan and Rakesh Mohan — as chairman and vice-chairman respectively for ECF.
Once the terms of reference are finalised, the committee will have to submit its report within 90 days.
However, the RBI board hasn’t set an internal deadline for the Board of Financial Supervision, which was tasked to revisit regulations defined as part of the Prompt Corrective Action. Banks and the government had complained that the framework was snuffing the life out of public sector banks, which are as it is starved of capital, crumbling under bad loans and higher provisions.
Meanwhile, experts say that the Central government should revamp RBI’s board, which currently has a cross-section of corporates (leading to a possible conflict of interest) and individuals with political leanings, and appoint more domain experts if it wants the board to have more say in decision-making.
According to sources, the new RBI Governor Shaktikanta Das, during his stint at the Ministry of Finance, was well aware of the challenges being faced by the Public Sector Banks. Hence, they said, the banks are hopeful that the RBI will be considerate towards them in future.