Updated: November 18, 2018 10:28:35 pm
In the midst of a continuing divide between the Union government and the Central Bank, all eyes will be turned to the Reserve Bank of India (RBI) board meeting on Monday. Candidates from the Ministry of Finance and several independent directors are expected to deal with Governor Urjit Patel and his team in matters ranging from the liquidity of the MSMEs to the economic capital framework.
The meeting comes under reports that Urjit Patel may resign PTI reported that the governor is likely to represent a united front. RBI's 18-member board of directors supported the central bank's task of cleaning bank balance sheets, PTI reported.
MSMEs, liquidity issues
During the meeting, RBI is expected to consider a special scheme for micro, small and medium-sized enterprises (MSME) and non-bank financial corporation (NBFC) that faces liquidity problems. Under pressure from Demonetisierung and GST the decision was used as a breather for the KKMU. Central Board Member S Gurumurthy said Thursday that demonization and the Goods and Services Tax (GST) "hit" the micro and small and medium-sized enterprises (MSME) sector to demand more credit for the sector " starved of money ". and "robbed of credit".
In addition, the latest RBI data show that banks' outstanding lending to the Micro, Small and Medium Enterprises (MSME) sector declined for the first time in 14 months in September 2018.  Explains | Decoding of the RBI Central Board
Both the government and the bank are seeking to reach an agreement on easing the standards for the Prompt Corrective Action (PCA) framework. Of the 21 state-owned banks, 11 are subject to the PCA framework, which imposes lending and other restrictions on weak lenders. As a result of the easing, some banks may come out of the PCA framework by the end of this tax year. The PCA framework begins when banks breach one of the three main regulatory trigger points, namely the ratio of capital to risk-weighted assets, NPA (Non-Performing Assets) and Return on Investment (ROA).
Given the tensions with the RBI, the central government had indicated that it referred to the unprecedented Section 7 of the RBI Act, which was given the authority to issue instructions and questions to the Central Bank Central Bank to judge autonomy and independence of the RBI. Last month, RBI Deputy Governor Viral Acharya talked about central bank independence, arguing that a compromise could potentially be "catastrophic" for the economy.
Another focal point for economic capital
is the framework for economic capital that governs RBI's capital requirements and the conditions for transferring its surplus to the government. On November 6, the Indian Express reported that a proposal from the Treasury Department for transferring a surplus of Rs.3.6bn (more than a third of the Reserve Reserve's total of Rs 9.59) to the government was not accepted became the RBI. However, Economy Minister Subhash Chandra Garg tweeted that reports from the government seeking a huge surplus surplus transfer were not true.
Finance Minister Arun Jaitley said on Saturday that growth must not be curtailed by restricting credit availability and liquidity. It is necessary that the growth process is not hampered by the cleansing of the banking system of "collective sins" in 2008-2014, when the regulatory mechanisms have also overlooked the high level of debt accumulation, he said a day of central bank independence billing and the Indian Economy
– P. Chidambaram (@PChidambaram_IN) November 17, 2018
Government, RBI heading for confrontation: Chidambaram
Former Finance Minister Chidambaram, who had declared November 19 as "the day of Settlement, "said the government and the RBI, which are moving towards a" confrontation "at the bank's board meeting on Monday. "The government is determined to" conquer "the RBI in order to gain control of the reserves. The other so-called discrepancies are just a smoke screen (sic), "he tweeted. Chidambaram said, "Nowhere in the world is the central bank a board-led company. Claiming that individuals will direct the governor is an absurd idea.
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