Mumbai: The central board of the Reserve Bank of India (RBI) that met on Friday under Shaktikanta Das, who took over as RBI governor on Wednesday after the surprise resignation of Urjit Patel on Monday, has decided to further examine the governance framework of the central bank.
Shaktikanta Das buys time amid RBI autonomy row
The RBI board meeting, which lasted for nearly four hours, also reviewed the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery and issues of 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,” the central bank said in a statement after the board meeting.
The board could seek a more active role for itself, including setting up of new sub-committees to oversee policy matters such as financial stability, according to a person familiar with the matter, indicating a move that will empower it beyond its current limited advisory role. At present, the RBI’s committees include the Committee of the Central Board (CCB), Board for Financial Supervision (BFS), and Board for Payment & Settlement Systems. The other sub-committees are the Audit and Risk Management Sub-Committee (ARMS), Human Resource Management Sub-Committee, Building Sub-Committee and Information Technology Sub-Committee.
In the previous RB board meeting on 19 November, the board decided to constitute a committee of experts to fix an appropriate level of the economic capital framework for the RBI, which would decide how much contingency reserves it should hold at any given time. The membership and terms of reference of the committee is to be jointly determined by the government and the central bank. However, a decision on its chairman is pending.
The transfer of RBI reserves, ₹9.43 trillion as of June 2018, to the government has been one of the contentious issues between the government and the central bank and is seen as one of the reasons for Urjit Patel’s resignation.
At the 19 November meeting, the board also decided to refer the issue of relaxing the prompt corrective action framework, which applies to 11 of the 21 public sector banks, to the board of financial supervision of the central bank. Some of the government nominees to the board have demanded that the RBI should be run by the board and not just by the management.