Board agrees to further examine RBI governance framework

Mumbai: The crucial central board the Reserve Bank of India (RBI), that met on Friday under new RBI governor Shaktikanta Das, has decided to further examine the governance framework of the central bank. The RBI board meeting, which lasted for nearly four hours, also reviewed the current economic situation, both global and domestic challenges, matters relating to liquidity and credit delivery, and issues related to currency management and financial literacy. The 18-member board also discussed the draft report on the Trends and Progress of Banking (2017-18).

“The board deliberated on the governance framework of the RBI and it was decided that the matter needs further examination,” RBI said in a statement after the meeting.

Friday’s was the first RBI board meeting chaired by Das, who took over as the 25th governor of the central bank on Wednesday after the surprise resignation of Urjit Patel on Monday.

In the previous RBI board meeting held on 19 November, which lasted over 10 hours, the board had decided to constitute a committee of experts to fix an appropriate level of economic capital framework (ECF) for RBI which would decide how much contingency reserves it should hold any given time and the membership and terms of reference of which will be jointly determined by the government and the central bank. Nothing has officially progressed on the matter as the government and the central bank are not yet on same page on the name of the chairman of the six-member panel.

The issue of transfer of RBI reserves, which stood at ₹ 9.43 trillion as of June 2018, to the government has been one of the contentious issues between the government and the central bank for a long time and also is seen as one of the key reasons for Urjit Patel’s resignation.

At the 19 November meeting, the RBI board had also decided to refer the issue of relaxing the prompt corrective action (PCA) framework—under which are 11 of the 21 public sector banks—to the board of financial supervision of the central bank.

It can be noted that some of the new government nominees to the RBI board have been demanding that the central bank should be run by the board and not just by the management.