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RBI Governor Meets PM Modi Ahead of November 19 Meeting

RBI Governor Meets PM Modi Ahead of November 19 Meeting

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  13 Nov 2018 6:50 AM GMT

Guwahati: Amidst the rising clashes and differences of opinion between the Reserve bank of India and the Modi government, RBI Governor Urjit Patel held a meeting with Prime Minister Narendra Modi.

Internal sources have leaked that Dr. Patel apprised the central bank’s rationale for its discomfort over a series of demands made by the Finance Ministry. The meeting also discussed other burdens put on the RBI like the higher dividend and lower capital requirement for banks.

As the much significant central bank’s board meeting is scheduled to be held on November 19, this prior meeting between the RBI governor and Indian PM is also of greater value which will ease the path for discussion in the forthcoming meeting. Moreover, the face-off between the central bank and the Finance Ministry over issues too was going over the head for which this meeting with the PM was of utmost importance.

Further, there are indications that the RBI may create a special dispensation for lending to small and medium enterprises, but that is also not clear yet as to whether there will be an agreement to ease liquidity situation for non-banking finance companies (NBFCs) and the RBI parting with its substantial part of its surplus.

The recent tension between the RBI and Finance Minister took a peak when the Finance Ministry took up the never-used-before Section 7 of the RBI Act. According to this Act, the government is empowered to issue directions to the RBI Governor. Moreover, there were other issues like the government seeking as fund transfer of Rs. 3.6 lakh crore which was leaked from the RBI side. But later, Economic Affairs Secretary Subhash Chandra Garg dismissed such news saying that the government was not in any dire need of funds and there was no proposal to transfer Rs 3.6 lakh crore from the RBI to the government. Garg also added that the only proposal was to initiate "under discussion is to fix appropriate economic capital framework of RBI".

Also read: RBI listens to government, but takes decisions only for national interest

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