Decisions taken at the RBI board meeting

Government, RBI signal truce after marathon board meeting

New Delhi/Mumbai: The Reserve bank of India (RBI) signalled a compromise with the government by agreeing to study its demands, including the transfer of surplus reserves—an issue that had triggered a public spat between the monetary policy makers and their political bosses. (read more)

No confrontation between Government and RBI: Piyush Goyal

Indore: Union minister Piyush Goyal denied Monday any confrontation between the government and the Reserve Bank Of India (RBI). Goyal said that there was nothing objectionable in discussions among the members of RBI’s board of directors about the central bank’s responsibilities towards the country.In reply to a question amid the RBI board meeting, Goyal said: “We are not seeing any tension between government and RBI. Only Congress chief Rahul Gandhi and you people (media) are showing the signs of tension.” “The government has already clarified that it has not asked for even a single rupee from RBI reserves.” PTI

RBI to inject ₹8,000 crore liquidity on 22 November

Mumbai: The Reserve Bank of India on Monday said it will inject ₹8,000 crore into the system through purchase of government securities on 22 November.“Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the has decided to conduct purchase of the following government securities under Open Market Operations for an aggregate amount of ₹80 billion on November 22, 2018 (Thursday)...,” it said in a statement.The OMO operation will help ease tight liquidity situation triggered IL&FS defaults. The eligible participants should submit their offers in electronic format on RBI Core Banking Solution (E-Kuber) system on 22 November. PTI

RBI to set up expert panel to examine economic capital framework

Mumbai: The Reserve Bank of India (RBI) said on Monday it has decided to set up an expert panel to examine the economic capital framework of the central bank, in a move that could prompt a rethink of what constitutes adequate capital reserves for the central bank. For weeks, government officials have been pressuring RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government. Reuters

RBI to rework PCA framework for banks, restructure MSME loans

The central board of the Reserve Bank of India (RBI) on Monday discussed capital requirements for banks, restructuring of MSME loans and a rework of the Prompt Corrective Action (PCA) framework to address the bad loan crisis in India’s banking system, the central bank said in a statement.The board also decided to constitute an expert committee to examine Economic Capital Framework, the membership and terms of reference of which will be jointly determined by the Government of India and the central bank.The board also advised that RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to ₹25 crore, subject to such conditions as are necessary for ensuring financial stability. Livemint

Next RBI board meeting on 14 December

The board of the Reserve Bank of India (RBI) will meet next on 14 December, BloombergQuint quoted board member Sachin Chaturvedi as saying. RBI will also form a panel to study surplus funds transfer to the government.

RBI board agrees to improve liquidity, up credit to SMEs

The board of the Reserve Bank of India (RBI) on Monday agreed to ease liquidity for the financial sector and increase credit to small businesses, two people present at the meeting said. Some more contentious issues were kicked down the road to be discussed by newly formed committees, the people said.“The meeting happened in a very cordial environment. Most of the issues were resolved in an amicable manner,” a board member, who attended the meeting, told Reuters. “A panel will be formed to work out a framework to determine the reserves requirements of the RBI and transfer surplus funds to the government,” the board member said. Reuters

RBI to allow banks to recast SME loans, transfer surplus funds to govt

After a marathon board meeting, RBI is expected to permit banks to recast loans given to small and medium enterprises (SMEs). The RBI board also seems to have decided to set up committees to look at transfer of surplus funds to the government. The meeting was very comprehensive and ended on a cordial note, and didn’t see any voting by members, said a board member on conditions of anonymity. Gopika Gopakumar, Mint

RBI discusses reserves issue, panel to review capital transfer

The RBI board discussed the reserves issue at today’s board meeting, as well as setting up of a a committee to review capital transfer, Reuters quoted ET Now as saying. A decision on improving credit flow to MSMEs is expected, BloombergQuint quoted an official aware of the developments as saying.

RBI day-long board meeting ends, statement soon

The RBI concluded a critical day-long board meeting, said a source familiar with the situation. It wasn’t immediately clear whether it had come to any conclusions in a dispute with the government over easing liquidity for the financial sector and increasing credit to small businesses, Reuters reported.The government has been pressing the RBI to reduce capital ratios for banks, which would speed up loans to small businesses in remote parts of the country, a crucial vote bank for Prime Minister Narendra Modi. There are five key state elections in the next few weeks and a general election due by May.

Sensex rallies over 300 points ahead of RBI board meet outcome

Mumbai: The BSE benchmark Sensex rallied over 300 points Monday to end at over six-week-high of 35,774.88 as investors widened their portfolios ahead of outcome of the RBI board meeting amid FPI inflows. Positive cues from other Asian markets and a firm opening in European shares buoyed investor sentiment in India.A crucial meet of the Reserve Bank of India’s central board is underway amid a rift between the central bank and the government over future course of policies.The finance ministry nominees and some independent directors were expected to take on Patel and his team over issues ranging from MSME credit to RBI reserves, though both sides are in favour of reaching a common ground. Expectations of a positive outcome boosted market mood after the meeting began.

Expect the best & the worst at RBI board meeting today

A lot will depend on the guidance provided by RBI governor Urjit Patel at the RBI board meeting today. https://t.co/ISif9npoKz

— Livemint (@livemint) November 19, 2018

Limited surplus transfer from RBI could help end feud: Bloomberg

The Reserve Bank of India largely has itself to blame for the government’s interference in its independence. Bloomberg Economics sees merit in political demands for a lower capital reserve framework for the central bank. A limited surplus transfer from the RBI to the government could bring an amicable end to the feud.

Graphic: Bloomberg

Sensex, Nifty rise 1% ahead of RBI meeting outcome

The BSE Sensex closed 317.72 points, or 0.90%, up at 35,774.88, while the Nifty 50 ended 81.20 points, or 0.76%, higher at 10,763.40. The MidCap and SmallCap indices added 0.3%, respectively.All the sectoral indices on BSE, except oil and gas, advanced led by realty, FMCG, energy, auto and consumer durables, which rose over 1%. Yes Bank, ITC, Tata Motors, IndusInd Bank and Vedanta were among the top gainers on the key indices, whereas Indiabulls Housing Finance, ONGC, ICICI Bank, SBI and Asian Paints were major losers.

5 issues likely in focus at RBI board meeting today

It is time the government and the central bank bury the hatchet so that the Indian economy can go surely on the path of growth. https://t.co/yuuPAqCz0R

— Livemint (@livemint) November 18, 2018

RBI to stay tough on bad loan rules: Report

The Reserve Bank of India is open to review of corrective action plans for the state-run banks and wants the government to commit more for health of state-run banks, reported ET NOW, citing news agency Cogencis. The central bank, however, will not ease bad loan norms, according to the TV channel.

RBI’s dividend payment to the government

The government is asking the central bank to hand over a part of its surplus reserves to put that to more productive use, reported Bloomberg. Economics affairs secretary S.C. Garg is expected to make a presentation in the board meeting to outline the concerns of the finance ministry and could bring up the question about the transfer of surplus cash reserves held by the RBI, Reuters reported, citing sources. An RBI board member told Reuters that an expert panel may be set up to work out the appropriate level of contingency reserves for the RBI, effectively kicking that question down the road.

Graphic: Mint

Chronology of the RBI-govt face-off

Graphic: Mint

Market update: Sensex, Nifty trade higher; Rupee rises against dollar

The BSE Sensex traded 165.91 points, or 0.47%, up at 35,623.07, while the Nifty 50 rose 27.70 points, or 0.26%, to 10,709.90. Among the sectoral indices on BSE, realty and metal led gains and rose over 1%. FMCG, healthcare, auto and consumer durables also advanced. On the other hand, oil and gas, IT, telecom and teck declined. The rupee traded at 71.83, up 0.12% from its previous close.

Swaminathan Gurumurthy stirs debate as RBI board meets

Swaminathan Gurumurthy may be key to whether a compromise can be found or whether the already public spat turns even uglier at today's RBI board meeting. https://t.co/ySGnsrxkNb

— Livemint (@livemint) November 19, 2018

What analysts expect from the RBI board meet

Saurabh Jain, assistant vice-president-research at SMC Global Securities: The major thing to look out from the meeting is if they come out with any respite for non-banking financial companies’ liquidity situation. Also, one would look at how many banks can come out from the prompt corrective action as per government’s wishes and what RBI can do towards that, apart from the issue of surplus reserves held by the central bank.Anders Faergemann, a fund manager in London at PineBridge Investments: Any moves by the government that would undermine the independence of the RBI would make us think twice about re-entering the Indian bond market. Strong institutions are critical for any country and to attract foreign capital the central bank will have to remain independent.“Foreign investors will wait to get some cues from today’s meeting on the extent to which the central bank is autonomous, but it will be good for bond markets in the short-term if the RBI gives in to the government’s demand for more liquidity,” Reuters quoted a dealer at a foreign bank as saying.

RBI board has 5 full-time directors from the bank and 2 govt reps

The two government representative on the RBI board are Subhash Chandra Garg, economic affairs secretary, finance ministry, and Rajiv Kumar, financial services secretary, finance ministry.

Graphic: Mint

Key issues likely in focus

In the crucial meeting today, the RBI board members will discuss (1) capital adequacy rules in India in accordance with Basel III norms, (2) prompt corrective action framework for weak banks, (3) liquidity crisis faced by small and medium enterprises and NBFCs, and (4) transfer of surplus by the RBI to the government. Besides, Bloomberg reported that the government has recommended that the board of the Reserve Bank of India draft regulations to enable setting up of panels to oversee functions including financial stability, monetary policy transmission and foreign exchange management.