New Delhi: Amidst the alleged ongoing rift with the government, the RBI's crucial board meeting with the Finance Ministry nominees and some independent directors began here on Monday. Almost at the same time, Congress president Rahul Gandhi tweeted asking RBI to stand firm.
He wrote:
Mr Modi and his coterie of cronies, continue to destroy every institution they can get their hands on. Today, through his puppets at the #RBIBoardMeet he will attempt to destroy the RBI. I hope Mr Patel and his team have a spine and show him his place.
— Rahul Gandhi (@RahulGandhi) November 19, 2018
RBI Governor Urjit Patel and his four deputies, who all are members of the RBI's 18-member central board, will present a united front, while a few independent directors too are expected to support the central bank's mission to clean up bank balance sheets, news Agency PTI quoting sources had said.
The central board, headed by the RBI Governor, is expected to discuss issues mentioned in the agenda circulated to the board members in advance. Off-agenda items can also be raised in the meeting, with the chair's permission.
The RBI's central board currently has 18 members, though the provision is that it can go up to 21. The members include Governor Urjit Patel and his four deputies as 'full-time official directors', while the rest 13 have been nominated by the government, including two Finance Ministry officials -- Economic Affairs Secretary and Financial Services Secretary.
PTI also said the government and Reserve Bank of India (RBI) are looking to reach at an agreeable solution with respect to relaxation of the Prompt Corrective Action (PCA) framework and easing of lending norms for the MSME sector.
If not in this board meeting, the issue of relaxation of PCA framework would reach a resolution in the next few weeks, they added.
As a result of the relaxation, some banks may come out of the PCA framework by the end of this fiscal.
Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.
These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.
The PCA framework kicks in when banks breach any of the three key regulatory trigger points -- namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).
The RBI is also expected to consider a special dispensation for micro, small and medium enterprises (MSMEs) and non-banking financial companies (NBFCs) which have been facing liquidity issues.
The government feels that the MSME sector -- which employs about 12 crore people and plays a critical role in the economy -- needs some support after being impacted by demonetisation and implementation of the Goods and Services Tax (GST).
However, the central bank has been averse to the government's demand as it considers the sectors to be vulnerable.
With PTI Inputs
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