Reserve Bank Governor Urjit Patel +
On Wednesday, the people of the country, including the never-before-used
Section 7 +
or the central bank
Speaking at the customary post-policy press, after the fifth bi-monthly policy review, wherein the
policy rates left unchanged +
, Patel’s parried three questions on these issues
“I will avoid those questions,” the governor said.
‘s public posturing on
Autonomy and on the economic capital management framework were also met with similar replies.
RBI governor to submit written questions
RBI governor Urjit Patel on Tuesday sent a parliamentary committee to discuss his views on some of the controversial issues, which may include the government citing never-used powers to get the central bank on the discussion table.
“Is this related to MPC resolution? I do not think so. We are here to discuss the MPC resolution and the macroeconomy,” said Patel, who was facing the press for the first time since the issues came out in the open in October
Relation between the Mint Road and North Block, after the finance ministry mandarins started consultations under the never-before-used section 7 of the RBI Act which empowers government to direct the central bank to take some public measures in public interest.
According to the central bank sources, the government had sent three letters to the RBI before October 10 with nearly a dozen demands, which were replied in within a week.
The government primarily wants the RBI to help the struggling non-bank lenders and MSMEs get some liquidity support, liberalize the prompt, corrective action framework on 11 of the state-run banks and undertake other steps which will help push growth, while RBI is maintaining a conservative stance avoiding any bad precedents
The poll-bound government, which is staring at falling revenue and a potential fiscal slippage, also wants the RBI to part with a large portion of it 9.6 trillion of its cash surplus, which the central bank has sternly opposed.
As the public spat between the two got wider public attention, the RBI’s central board, its November 19th meeting, had decided to climb down and decided to set up a panel to study the quantum of capital it needed from restructuring loans of up to Rs 25 crore to the distressed MSMEs.
The policy review on Wednesday, the RBI said it is committed to act as a lender of last resort to NBFCs but underlined that it does not feel the need to do so now. It also formed a panel to look at the issues of NBFCs which will submit its report in June 2019.
The frictions came to light on a public speech by deputy governor Viral Acharya, where he warned of investors’ anger if the RBI’s autonomy is compromised
After the report of action under Section 7 came up, the government had tried to ease tensions by saying that the autonomy is “essential” and an accepted governance requirement.