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Das’ first RBI board meet yielded discussions, but no final decisions on key sore spots

PW Bureau

There was no discussion, however on the PCA framework, which was one of the key areas of tussle between the government and the RBI New Delhi: The first Reserve Bank of India (RBI) board meeting chaired by newly-anointed Governor Shaktikanta Das was ‘cordial’ and discussed issues ranging from governance at the central bank to liquidity in the financial system. Although the board did not arrive at any decision but held an extensive dialogue on the governance structure in the RBI and the liquidity situation of non-banking financial companies (NBFCs) — two key areas of concern flagged by the finance ministry recently, sources said. After the nearly four-hour-long meeting, Das tweeted, “Good meeting of the RBI central board. Wide-ranging issues discussed.”

No discussion on PCA

A statement released by the RBI said that the board decided that it would further examine the governance framework within the Central bank and that discussions would continue. Two presentations were made by Economic Affairs Secretary Subhash Chandra Garg — one on the government’s proposal for governance reforms in the RBI and the other on the banking system, throwing light upon banks’ financials, credit flow and non-performing assets (NPAs). “Both the government and the central bank will reconcile their notes (on the RBI’s governance) and come back to the board in the next meeting. There was no commitment, though, from the new Governor on whether governance reforms in the RBI were needed or not,” the source said. The RBI issued a statement after the four-hour meeting. “The board reviewed, inter alia, the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy, and issues related to currency management and financial literacy,” it said. There was no discussion, however on the prompt corrective action (PCA) framework, which was one of the key areas of a tussle between the government and the RBI at the time Urjit Patel headed the Central bank. The Board for Financial Supervision, led by the RBI Governor, is expected to review the PCA framework in its next meeting. The next central board meeting is likely to be held before the upcoming Budget in February 2019.