RBI, govt signal truce, send contentious issue of surplus to expert panel

Mumbai: Signalling a temporary truce, the Reserve Bank and the government Monday agreed to refer to an expert committee the contentious issue of the appropriate size of reserves that the RBI must hold, while the central bank would consider restructuring of stressed loans of small businesses.

The setting up of the committee, whose members will be decided by the government and the RBI, followed a marathon nine-hour-long meeting of the central board that discussed threadbare issues that had brought the central bank and the Finance Ministry at loggerheads.

"The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI," the central bank said in a statement.

Currently, the capital base of RBI is Rs 9.69 lakh crore, and independent director and Swadeshi ideologue S Gurumurthy and the finance ministry have been wanting it to be lowered in line with global practices. The expert committee to be set up will now decide about the adequate size of the capital base.

The central board headed by RBI Governor Urjit Patel, which met amid the on-going tussle between the Finance Ministry and the central

bank over various issues, discussed the Basel regulatory capital framework, a restructuring scheme for stressed MSMEs, bank health under Prompt Corrective Action (PCA) framework and the Economic Capital Framework (ECF).

According to sources, no voting on any proposal took place, and Deputy Governor N S Vishwanathan made a detailed presentation to the board. Vishwanathan is the in charge of banking regulation and supervision.

About banks under Prompt Corrective Action (PCA), it was decided that the Board will examine the matter for Financial Supervision of the RBI.