After the RBI Central Board meeting in Mumbai on Monday, Congress president Rahul Gandhi hoped RBI Governor Urjit Patel and his team “have a spine” and resist Prime Minister Narendra Modi’s alleged trial to “destroy” every independent institution in the country.
Tweeting, Gandhi said: “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 try to destroy the RBI. I hope Mr. Patel and his team have a spine and show him his place.”
Today’s board meeting is crucial given the differences among the RBI and Finance Ministry on several contentious matters comprising the transfer of additional surplus from the central bank to the government.
It is seen that the government has sought a discussion on governance in the RBI and an appropriate economic capital framework during today’s meeting. Both sides, sources told The Indian Express, have included considerable ground in addressing two issues: ensuring relief and more credit to small and medium firms, and easing restrictions on state-owned banks to boost lending.
Besides this, the government is also looking for a consultative process in decision-making to align the overall economic policy framework, given its differences with the central bank over many matters, sources said.
These differences led to the government invoking, for the first time, a provision in the RBI Act-Section 7 to start the formal process of consultation with the RBI Governor on matters such as easing the prompt corrective action (PCA) framework for PSU banks, boosting liquidity and credit to medium and small enterprises and Non Banking Finance Companies (NBFCs), and transferring additional surplus from the RBI to the government.
The Indian Express reported on November 6 that at the heart of the RBI-government standoff is a proposal by the Finance Ministry seeking to transfer an extra of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government.