Indian banks can recapitalised with government bonds: RBI board member – Times of India

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Indian banks can recapitalised with government bonds: RBI board member – Times of India

NEW DELHI:

Indian banks

could be recapitalized with

government bonds

, said a independent director on the central bank’s board on Thursday, at a time when the Reserve Bank of India and the government are at loggerheads on regulatory issues.

S Gurumurthy has been a vocal member on the RBI for asking for easier credit and capital restrictions for Indian banks and more cash for small businesses, a view that is supported by top finance ministry officials and has deepened an ongoing rift between the government and the central bank

One way for the government to increase capital adequacy in state-run banks under Basel 3

The move will not require actual cash but also an accounting entry in banks, a process that has been used in the capital adequacy ratios in banks.

For weeks, government officials in New Delhi have been pressuring the Mumbai-based Reserve Bank of India for a range of demands, prompting RBI Deputy Governor

Viral Acharya

to warn the last month that undermining a central bank’s independence could be “catastrophic,” bringing the feud in the open

However, the government and the RBI are now getting close to some of their policies.

Gurumurthy, who has close links with the Rashtriya Swayamsevak Sangh (RSS), a right-wing organization that supports Prime Minister Narendra Modi’s

Indian Janata Party

, used for heavy import curbs on the country’s current account deficit He was speaking at an event in New Delhi.

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